THE  NEW 

CAPITALISM 

By 

S.  A.  BALDUS 


BOSTON  COLLEGE  LIBRARY 
CHESTNUT  HILL,  MASS. 


CHICAGO 

The  O’Donnell  Press 
621  Plymouth  Court 
1923 


Copyright,  1923,  by  S.  A.  Baldus. 
All  rights  reserved,  including  that  of 
translation  into  foreign  languages. 


PART  I 

The  Established  Okder 

Page 

Chapter  I.  The  Great  Unrest .  7 

II.  The  Clash  of  the  Classes .  14 

III.  The  New  Division  .  22 

IV.  The  Investors  and  the  Non-Investors .  28 

V.  The  Different  Kinds  of  Investors .  39 

VI.  The  Capitalistic  Entrepreneurs .  48 

VII.  The  Supreme  April  Fool  Joke .  61 

VIII.  The  Principle  of  Inflation .  72 

IX.  The  Volume  of  Inflation .  83 

X.  The  Capital  Crime  of  Overcapitalization ....  95 

XI.  The  Railroads:  An  Object  Lesson  in  Over- 

capitalization  .  Ill 

XII.  The  Stock  Market  .  128 

XIII.  Our  National  Wealth .  143 

XIV.  The  National  Income  .  162 

XV.  ‘ 1  Capital,  Labor  and  Brains” .  179 

XVI.  The  Shrinking  Dollar  .  191 

XVII.  The  American  Standard  of  Living .  203 

XVIII.  Mane-Tekel-Upharsin .  218 

PART  II 

The  New  Order 

Chapter  XIX.  “Where  There’s  a  Will — ” .  245 

XX.  “ — There’s  a  Way” .  265 

XXI.  Our  Principles  and  Policies .  283 

XXII.  Who  is  “The  Public”? .  295 

XXIII.  The  Science  of  Wages .  309 

XXIV.  The  Philosophy  of  the  Quantity  Wage .  324 

XXV.  The  Genesis  of  Wages  and  Living  Costs .  341 

XXVI.  The  Cost  of  Living  Basis  of  Wages .  356 

XXVII.  Wages  Under  the  New  Capitalism . 373 

XXVIII.  The  Cost  of  Living  under  the  New  Capitalism  388 

XXIX.  ‘ 1  Out  of  the  Frying  Pan  into  the  Fire  ” . 400 

XXX.  Economic  Changes  and  Adjustments . 415 

'  XXXI.  What  About  the  Farmer? .  434 

XXXII.  Where  will  the  Farmer  Stand? . 449 

XXXIII.  No  Political  Party .  460 

XXXIV.  The  Concluding  Chapter .  472 

r  A  Postscript  .  483 


First  Edition,  April,  1923 


PART  I 

THE  ESTABLISHED  ORDER 


CHAPTER  I 
The  Great  Unrest 


FOR  nearly  ten  years  it  has  been  dinned  into  our  ears 
that  there  is  “industrial  unrest,”  not  only  in  the 
United  States  but  throughout  the  world.  There  is: 
but  since  I  have  not  studied  political,  social,  industrial 
and  economic  conditions  in  Europe  at  close  range,  and 
have  only  such  knowledge  of  them  in  other  parts  of  the 
world  as  may  be  obtained  from  a  reading  of  books,  maga¬ 
zines  and  newspapers,  I  shall  exclude  Europe  and  the  rest 
of  the  world  from  the  present  discussion  and  confine 
myself  entirely  to  the  United  States, — surely  a  large 
enough  territory  and  with  enough  economic  problems  to 
enlist  the  best  energies  of  an  army  of  avowed  students. 

“Industrial  unrest”  is  supposed  to  be  conspicuous  in 
the  United  States.  Books  have  been  written  about  it,  arti¬ 
cles  without  number,  and  countless  editorials.  Have  there 
not — ever  since  we  entered  the  European  war  and  even 
after  the  armistice — been  hundreds  of  strikes,  and  threats 
of  strikes,  and  demands  for  wage  increases,  and  protests 
against  wage  cuts?  And  many  other  manifestations  of 
industrial  disorder,  such  as  Court  orders,  decisions  and 
injunctions;  Industrial  conferences,  boards,  and  commit¬ 
tees,  to  say  nothing  of  “red  plots,”  most  of  which  latter, 
however,  I  have  always  held,  existed  only  in  certain  official 
minds.  Even  though  you  were  to  enumerate  many  more 
evidences  of  unrest,  and  cite  many  additional  instances  of 
tumult,  I  today  maintain  that  it  is  not  industrial  unrest 
that  is  afflicting  the  United  States,  but  something  deeper, 
something  more  sweeping,  something  more  portentous — a 
social  and  economic  disease — contagious — fatal  if  not 
quickly  checked,  and  likely  to  become  epidemic  and  end 


7 


8 


The  New  Capitalism 


tragically.  The  existence  of  the  disease  cannot  be  denied; 
its  gravity  must  not  be  underestimated ;  its  symptoms  must 
not  be  ignored. 

Clearly  if  a  remedy  is  to  be  applied  it  is  important 
that  we  take  a  correct  diagnosis,  for  without  a  proper  diag¬ 
nosis  no  cure  is  possible.  Or,  having  the  right  remedy, 
care  must  be  taken  lest  we  give  the  medicine  to  the  wrong 
patient.  Surely  it  is  the  part  of  wisdom  to  honestly  en¬ 
deavor  to  discover  the  causes  of  the  disorder  and  to  eradi¬ 
cate  them,  if  possible. 

In  what  street  and  in  which  house,  then,  does  our  patient 
live,  and  what  is  his  name?  What  are  his  ailments,  and 
are  they  organic,  or  only  symptomatic  of  the  disease  from 
which  he  is  suffering?  Is  he  in  danger  of  getting  worse, 
or  is  there  a  likelihood  of  his  gradual  convalescence  and 
ultimate  recovery? 

The  Spendthrift  Workers 

It  is  noteworthy  that  all  through  the  years  1918  and 
1919,  and  the  first  half  of  1920,  when  the  industrial  unrest 
was  supposed  to  be  at  its  height,  industrial  workers  were 
better  off  than  ever  before;  at  least  they  were  being  paid 
better  wages  and  were  experiencing  less  trouble  in  having 
their  demands,  with  or  without  strikes,  satisfied.  In  fact, 
so  well  off  were  the  industrial  workers  that  they  were 
accused  of  spending  their  newly  acquired  “  riches  ”  like 
drunken  sailors.  Almost  daily  we  were  treated  to  moral¬ 
izing  editorials  anent  the  wanton  extravagance  of  the  wage 
earners,  and  the  orgy  of  reckless  spending  into  which  the 
industrial  workers  had  plunged  themselves.  We  were  told, 
not  once  but  a  hundred  times,  that  common  laborers  were 
buying  silk  shirts  and  automobiles;  their  wives  sealskin 
coats,  diamonds  and  pianos,  proof  of  the  hysteria  of 
spending. 

The  Silk  Shirt  Era 

Some  writers  on  economic  subjects  spoke,  and  still  speak, 
of  the  silk  shirt  era,  which  was  supposedly  at  its  height  in 


The  Great  Unrest 


9 


1919.  Common  laborers  in  mines  and  mills,  we  were  told, 
were  buying  silk  shirts,  not  one  or  two  at  a  time  but  in  half 
dozen  and  dozen  lots,  paying  ten,  twelve,  and  fifteen  dollars 
apiece  for  them,  and  wearing  them  to  their  work,  perhaps 
even  going  to  bed  with  them  on,  for  many  of  them  worked 
twelve  hours  a  day  and  seven  days  a  week.  I  have  always 
taken  these  “silk  shirt’ ’  reports  with  a  grain  of  salt.  I 
hold  that  they  were  grossly  exaggerated.  Most  of  those 
who  wrote  about  the  silk  shirt  laborers  in  mill  and  mine, 
never  brushed  shoulders  with  one  of  them.  It  is  quite 
certain  that  they  troubled  themselves  not  at  all  to  investi¬ 
gate  the  subject.  They  gave  us  no  proof,  no  statistics. 
We  had  nothing  but  their  unsupported  word,  based  on 
fabricated  rumor  and  hearsay  reports. 

Gary,  Indiana,  is  a  typical  steel  mill  town.  The  steel 
plants  there  employ,  let  us  say,  22,000  workers,  most  of 
them  foreigners.  What  percentage  of  these  22,000  steel 
workers  bought  silk  shirts  in  the  height  of  their  economic 
prosperity?  What  percentage  of  them  wore  silk  shirts  to 
their  work?  Who  can  tell?  Who  has  made  an  honest  in¬ 
quiry?  In  the  absence  of  an  investigation,  or  any  official 
report,  let  us  say  ten  percent,  or  2,200  of  the  workers  in 
the  Gary  steel  mills,  adorned  their  grimy  bodies  with  ten 
and  fifteen  dollar  silk  shirts.  What  does  that  prove?  It 
proves,  if  anything,  that  among  the  22,000  there  were 
2,200  fools — ten  percent;  which  I  contend  is  no  greater 
percentage  than  can  be  found  in  any  other  economic  group. 
Is  it  fair  to  include  the  other  19,800  non-silk-shirted  Gary 
steel  workers  in  your  sweeping  indictment  of  the  folly  and 
extravagance  of  a  few — whether  ten,  twenty  or  more  per¬ 
cent — of  the  total  number?  It  would  at  least  be  decent  to 
so  word  your  moralizing  comments — if  moralize  you  must 
— that  the  offending  few  shall  be  set  apart  from  the  many 
who  have  not  offended — the  economic  goats  separated  from 
the  sheep. 

I  am  wondering,  as  I  write,  whether  any  economic 
writer  harping  on  the  “silk  shirted”  wage  earner — at 
Gary,  let  us  say — has  ever  gone  to  the  trouble  of  learning 


10 


The  New  Capitalism 


from  the  merchants  at  Gary  how  many  silk  shirts  were 
actually  sold  by  them  to  the  workers  in  the  steel  mills. 
But  that  wouldn’t  be  conclusive,  for  no  doubt  many  of 
them  made  their  purchases  in  Chicago.  And  I  am  won¬ 
dering,  too,  just  how  much  of  an  increase  or  decrease  in 
savings  accounts  the  banks  of  Gary  could  show  for  the  silk 
shirt  era  of  prosperity  during  and  even  after  the  war. 

The  Miracle  of  Spending  and  Hoarding 

A  few  months  after  the  armistice,  the  same  papers  that 
published  doleful  comments  anent  the  silk  shirt  extrava¬ 
gance  of  the  mine  and  mill  and  other  industrial  workers, 
many  of  whom  were  foreigners,  also  complained  that  thou¬ 
sands  of  them  were  going  back  to  their  native  lands,  taking 
with  them  millions  of  American  money.  Precisely  how 
they  could  spend  millions  in  reckless  extravagance,  and 
also  save  and  hoard  millions,  has  never  been  satisfactorily 
explained.  A  man  cannot  be  sick  in  bed,  crippled  with 
rheumatism,  and  run  a  Marathon  race  at  the  same  time. 
Either  the  moralizing  commentators  were  guilty  of  exag¬ 
gerating  the  reckless  extravagance  of  the  industrial  work¬ 
ers,  or  the  economic  diagnosticians  were  wrong  when  they 
decided  that  the  patient  was  suffering  from  unrest. 

Barking  Up  the  Wrong  Tree 

There  would  be  more  justification  for  the  cry  “industrial 
unrest  ’  ’  today  than  there  was  four  or  five  years  ago !  All 
through  1918  and  1919,  and  the  first  six  months  of  1920, 
everybody  was  working,  and  the  wages  of  many  were  ad¬ 
mittedly  above  the  level  of  former  years;  while  in  1921 
four  and  a  half  millions  of  industrial  workers  were  out  of 
work,  or  working  only  part  time.  Many  mills  and  factories 
closed  down  entirely.  With  that  singular  mental  obliquity, 
which  seems  to  be  a  national  characteristic,  we  put  up  the 
red  card  of  danger  on  every  door  when  the  disease  was 
endemic,  and  now  that  it  is  epidemic  we  take  it  down  from 
all  doors. 

The  fact  is  that  when  we  said  there  was  industrial  unrest 


The  Great  Unrest 


11 


there  was  less  of  it  than  the  usual  amount  among  the  indus¬ 
trial  workers.  But  there  was — and  we  said  little  or  noth 
ing  about  it — unrest — not  so  much  among  the  industrial 
workers  as  among  the  mass  of  the  people  —  men  and 
women  who  cannot  be  called  industrial  workers — millions 
of  men  and  women  who  have  had  little  or  no  increase  in 
their  wages  or  salaries,  and  who  are  finding  it  increasingly 
difficult  to  make  ends  meet.  Many  of  them  have  been  com¬ 
pelled  to  abandon  their  accustomed  mode  of  life,  and  to 
adopt  a  lower  standard  of  living. 

When  you  speak  of  industrial  unrest  there  arises  the 
vision  of  discontented  workmen,  turbulent  toilers — gener¬ 
ally  organized — clamorously  engaged  in  a  struggle  for  more 
wages,  fewer  hours,  better  working  conditions  or  what  not ; 
or  else  contending  for  some  principle,  or  demanding  some 
right  or  concession,  or  opposing  some  real  or  fancied 
aggression.  The  mind  does  not  include  in  the  picture  the 
average  non-industrial  working  man  and  woman,  working 
for  an  inadequate  wage  or  salary,  helpless,  unorganized, 
without  leaders  and  without  spokesmen.  Yet  the  unorgan¬ 
ized,  non-industrial  workers  outnumber  the  organized  in¬ 
dustrial  workers. 

Among  those  unorganized,  unchampioned  millions  of 
men  and  women,  their  grievances  ignored  and  all  redress 
denied  them,  there  is  and  has  been  for  years,  bitter  unrest, 
and  a  more  poignant  discontent  than  among  the  organized 
industrial  workers.  Therefore  I  insist  that  “industrial 
unrest’ ’  does  not  fairly  state  the  case.  You  must  amplify 
it  to  include  the  whole  population,  or  rather,  that  vast 
portion  of  it  which  has  no  other  income  than  is  derived 
from  wages  or  salaries.  Speak  not  of  industrial  unrest 
only.  Call  it  national  unrest — call  it  universal  discontent 
— not  industrial  in  character  so  much  as  social  and  eco¬ 
nomic. 

'  WTiy  beat  around  the  bush?  Why  predicate  about  a 
comparatively  small  group  of  industrial  workers  only, 
what  is  easily  predicable  of  the  majority  of  the  people — 
both  industrial  and  non-industrial  workers?  I  have  scant 


12 


The  New  Capitalism 


patience  with  these  wrong  economic  diagnoses.  I  chal¬ 
lenge  every  statement  that  contains  ten  percent  of  truth 
and  is  ninety  percent  a  lie;  statements  that  are  clearly 
misstatements  based  on  one  part  fact  and  nine  parts  fabri¬ 
cation. 


The  Danger  Symptoms 

Industrial  unrest?  No,  something  deeper,  something 
more  fundamental,  something  more  terrible,  is  gnawing 
at  the  vitals  of  our  nation.  Those  who  prate  of  industrial 
unrest  when  the  whole  country  is  in  social  foment  and 
economic  upheaval,  are  but  “fiddling  Neros”  or  arrant 
knaves.^  The  industrial  part  of  the  unrest  is  only  the 
rumbling  of  the  coming  disaster — a  faint  sound  made  by 
an  exasperated  group,  audible  only  because  they  are  partly 
organized;  of  workers  whose  occasional  manifestation  of 
discontent  is  but  the  feeble  stirring  of  an  outraged  sense 
of  justice  that  is  slowly  corroding  the  hearts  and  embit¬ 
tering  the  minds  not  only  of  industrial  workers  but  a  tre¬ 
mendous  majority  of  our  nation;  of  wage  earners  whose 
spasmodic  turbulency  is  merely  an  echo  of  the  pent  up 
fury  that  is  harrowing  the  very  souls  of  millions  of  men 
and  women  in  the  United  States.  These  periodical  labor 
turmoils  are  the  reverberation  of  fierce  passions  raging 
within  bruised  breasts;  gestures  of  protest  against  wrongs 
they  seem  powerless  to  redress;  a  chorus  cry  of  rage 
against  conditions  from  which  they  seem  not  yet  to  have 
discovered  the  logical  way  to  escape,  or,  to  adjust. 

Economic  Quacks  cmd  Nostrums 

No!  ye  exalted  economic  doctors  in  subsidized  colleges, 
ye  learned  professors  in  endowed  universities,  ye  silver- 
tongued  after-dinner  speakers,  and  mercenary  apologists 
for  the  Capitalistic  System;  ye  hired  quacks  of  plausible 
speech,  and  self  appointed  analysts  of  the  ills  afflicting  the 
body  social  and  economic;  ye  deluded  editors,  officious 
writers,  and  obsequious  scribblers; — ye  who  would  have 
the  world  believe  that  the  trouble  is  in  the  foot,  when  it 


The  Great  Unrest 


13 


is  the  heart — a  heart  no  longer  merely  functionally  dis¬ 
turbed  but  organically  diseased  and  beating  weak  and 
slow — I  tell  you  your  diagnosis  is  false,  and  you  are  de¬ 
ceiving  yourselves  rather  than  the  public.  The  industrial 
unrest  of  which  you  speak  is  only  one  of  the  symptoms  of 
a  national  malady — a  virulent  disease — a  malignant  disease 
which  cannot  be  cured  with  salves,  lotions  and  unguents, 
but  calls  for  the  skilful  use  of  the  knife. 

The  Patient  Must  Cure  Himself 

The  case  stated  in  its  nakedness  is  simply  this:  There 
is  today,  and  there  has  been  for  more  than  a  decade  of 
years  past,  economic  unrest  and  continuously  growing 
social  discontent  among  eighty  percent  of  the  population 
of  the  United  States — industrial  and  non-industrial  toilers 
— working  men  and  women,  organized  and  unorganized — 
and  their  families.  These  eighty  million  people;  these 
sixteen  million  families,  have  neither  leaders  nor  spokes¬ 
men  ;  no  representatives  of  their  case,  no  defender  of  their 
rights,  no  pleader  of  their  cause. 

I  have  appointed  myself  their  advocate  and  their  cham¬ 
pion.  This  book  is  written  for  the  purpose  of  arousing 
them  to  the  full  realization  of  their  present  condition, 
bound  to  grow  worse  unless  they  bestir  themselves  promptly 
and  organize  themselves  into  a  unified  group.  I  exhort 
them  to  combine  their  scattered  forces  into  a  formidable 
power.  I  urge  them  to  constitute  themselves  into  a  mighty 
army — a  solid  phalanx ;  to  be  no  longer  a  despairing  horde 
but  an  embattled  host,  whose  cause  is  just,  whose  might  is 
the  right,  and  whose  strength,  united,  is  invincible. 


CHAPTER  II 

The  Clash  of  the  Classes 


IN  the  older  European  countries  society  is  generally 
divided  into  classes.  This  division,  which  is  both  social 
and  economic,  is  accepted  by  all  concerned  without 
question  or  cavil.  In  some  of  the  countries,  particularly 
England,  the  class  system  has — as  is  inevitable — degener¬ 
ated  into  a  caste  system  not  unlike  that  which  has  fastened 
its  throttling  death  grip  upon  India.  Kenneth  L.  Roberts, 
in  an  article  in  The  Saturday  Evening  Post  (February  19, 
1921),  writes: 

“H.  G.  Wells  has  said  that  there  are  more  than  two 
hundred  classes  to  English  society.  Some  of  the  delicate 
distinctions  between  different  English  classes  are  such  as 
to  give  many  persons  a  slow,  shooting  pain  at  the  base  of 
the  brain.  There  is  a  distinction,  for  example,  between  a 
graduate  of  Oxford  University  and  a  graduate  of  London 
University.  The  latter  belongs  to  a  lower  class  than  the 
former.  There  is  a  distinction  between  an  Episcopalian, 
or  Church  of  England  clergyman,  and  a  Baptist  or  Con- 
gregationalist  or  Presbyterian  minister.  The  Episcopalian 
belongs  to  a  higher  class  than  the  Nonconformist  minister. 
Workingmen  are  divided  by  rigid  class  distinctions.  Cer¬ 
tain  trades  are  classed  far  higher  than  other  trades.  The 
barrister,  who  argues  a  case  for  a  client,  is  in  a  much 
higher  class  than  the  solicitor,  who  approaches  the  bar¬ 
rister  for  the  client  and  persuades  him  to  accept  the  case. 
If  a  member  of  the  so-called  upper  classes  undertakes  to 
sell  stoves  or  cheese  or  canned  goods,  he  falls  from  the  class 
he  originally  occupied  to  a  lower  class.  If,  however,  he 
chooses  to  sell  automobiles,  stocks  and  bonds,  or  land,  he 


14 


The  Clash  of  the  Classes 


15 


remains  in  his  original  class  and  is  not  lowered.  These 
three  pursuits  are  exempt  from  the  stigma  which  attaches 
to  trading  in  all  other  commodities.  .  .  .  There  is 

class  distinction  in  England,  and  the  distinction  is  recog¬ 
nized  and  acquiesced  in  by  every  class.  The  lower  the 
classes  the  more  rigid  the  distinctions.” 

Caste 

Need  I  emphasize  that  this  is  no  longer  class  distinction, 
but  that  terrible  curse  called  caste.  In  Italy,  France,  Ger¬ 
many,  Russia,  and  other  European  countries,  there  are, 
as  far  as  I  have  been  able  to  discover,  fewer  divisions  and 
less  invidious  distinctions  than  in  England,  especially 
among  the  humbler  social  or  economic  contingents.  What¬ 
ever  of  caste  is  observable  seems  to  be  confined  to  the 
upper  laminae,  rather  than  to  the  lower  strata  of  society. 

Arbitrary  Class  Divisions 

But  whatever  the  varying  divisions  and  sundry  subdivi¬ 
sions  in  the  different  countries  may  be,  broadly  speaking 
society  everywhere  has  for  several  centuries  been  appor¬ 
tioned  into  three  great  groups,  or  classes,  namely,  the 
upper  class,  the  middle  class,  and  the  lower  class.  It  is  to 
be  noted  here  that  there  is  no  uniform  rule  or  standard; 
the  class  division  is  purely  arbitrary.  For  example,  speak¬ 
ing  of  France — the  celebrated  M.  Quesnay,  physician  to 
the  court  of  Louis  XV,  divided  society  into  three  classes: 

“The  first,  or  productive  class,  by  whose  agency  all 
wealth  is  produced,  consists  of  the  farmers  and  labourers 
engaged  in  agriculture,  who  subsist  on  a  portion  of  the 
produce  of  the  land  reserved  to  themselves  as  the  wages 
of  their  labour,  and  as  a  reasonable  profit  on  their  capital ; 
the  second,  or  proprietary  class,  consists  of  those  who  live 
on  the  rent  of  the  land,  or  on  the  nett  surplus  produce 
raised  by  the  cultivators  after  their  necessary  expenses 
have  been  deducted;  and  the  third,  or  unproductive  class, 
consists  of  manufacturers,  merchants,  menial  servants,  &c., 
who  subsist  entirely  on  the  wages  paid  them  by  the  other 


16 


The  New  Capitalism 


two  classes;  and  whose  labour,  though  exceedingly  useful, 
adds  nothing  to  the  national  wealth.  ’ 7 1 

Henry  Parkinson,  writing  in  1913,  divides  society  in 
England  on  an  entirely  different  basis.  “Roughly  speak¬ 
ing/’  he  says,  “the  upper  class  will  include  the  aristocracy, 
nobility,  the  greater  landowners,  the  capitalist  financiers. 
The  middle  class  will  comprise  (1)  producers  (small  land- 
owners  and  tenant  farmers,  the  yeoman  class,  and  the 
captains  of  industry)  ;  (2)  distributors,  like  merchants 
and  retailers;  (3)  the  great  services  (ministers  of  religion, 
teachers,  doctors  and  nurses,  lawyers  and  clerks,  officers 
of  army  and  navy,  the  civil  service).  By  the  lower  class 
is  understood  the  vast  number  of  those  who  live  mainly 
by  the  fruit  of  their  labour  and  are  without  landed  or 
other  capital.  ’  ’1  2 

The  important  thing  to  remember  here  is  that  there  is 
no  uniformity  as  regards  class  divisions;  each  writer  fol¬ 
lows  his  own  particular  notions,  or  classifies  society  accord¬ 
ing  to  the  accepted  standards  of  the  day,  or  the  prejudices 
of  the  country  in  which  he  lives.  Certainly  there  is  noth¬ 
ing  scientific  about  such  classifications. 

No  Glasses  in  the  United  States 

But  I  am  not  particularly  concerned  at  this  moment 
with  any  country  except  the  United  States.  Here  at  home 
I  contend  that  there  are  no  classes,  save  for  the  conve¬ 
nience  of  the  sociologist.  I  say  this  with  the  full  knowledge 
that  all  our  writers  on  economics  habitually,  and  quite 
erroneously,  indulge  in  class  distinctions,  and  prate  with 
turgid  eloquence  of  “class  consciousness.”  They  have 
divided  us,  too,  into  the  three  great  classes — upper,  middle 
and  lower.  I  do  not  know  wiiether  any  have  ventured  to 
say  just  who  is  to  be  included  in  each  of  these  three 
classes,  but  if  so,  it  was  without  troubling  themselves  about 
stating  the  essential  qualifications  or  distinctive  charac¬ 
teristics  of  each  class. 


1  “The  Principles  of  Political  Economy,”  by  J.  R.  McCullough. 

2  "A  Primer  of  Social  Science,”  by  Henry  Parkinson,  D.D. 


The  Clash  of  the  Classes 


17 


I  do  not  feel  disposed  at  this  time  to  quarrel  with  these 
writers  for  their  lack  of  definiteness  when  writing  about 
their  upper,  middle  and  lower  class  divisions;  but  I  take 
issue  with  them  when  they  transcend  the  limits  of  mere 
classification  and  proceed  to  make  distinctions  which  are 
not  only  arbitrary  and  unwarranted,  but  undemocratic 
and  unscientific. 

Otto  H.  Kahn,  in  an  article  published  in  The  Annalist 
(January  3,  1921)  speaks  of  the  so-called  middle  class  as 
composed  of  “the  men  and  women  living  on  moderate 
incomes,  the  small  shop  keeper,  the  average  professional 
man,  the  farmer,  etc.”  And  then  he  continues  to  say  that 
the  welfare  of  these  “is  just  as  important  to  the  commu¬ 
nity  as  the  welfare  of  the  wage  earner.” 

By  what  right  does  Mr.  Kahn  segregate  the  wage  earn¬ 
ers?  By  what  right  does  Mr.  Kahn  differentiate  between 
those  whose  maintenance  is  derived  from  wages,  and  those 
who  receive  a  salary,  or  whose  income,  the  equivalent  of 
a  wage  or  salary,  is  derived  from  some  other  pursuit,  or 
source  ? 

The  middle  class  may  indeed  be  composed  of  “the  men 
and  women  of  moderate  income,”  but  I  insist  that  it 
doesn’t  make  a  particle  of  difference  wThetker  their  mod¬ 
erate  income  is  derived  from  wages,  salary,  or  a  small 
business,  or  the  practise  of  a  moderately  lucrative  profes¬ 
sion.  I  contend  that  the  wage  earner,  whose  “moderate 
income”  is,  say,  $1,000  or  $1,500  a  year,  has  as  much  right 
to  consider  himself  as  belonging  to  the  middle  class  as  has 
the  butcher  or  the  baker,  or  the  lawyer,  or  farmer  having 
approximately  the  same  amount  of  income. 

Confusing  Society  with  Economics 

The  dictionary  defines  the  middle  class  as  “the  class 
that  occupies  an  intermediate  position  socially.”  The 
middle  class,  therefore,  is  primarily  a  social  group;  but 
that  is  not  the  sense  in  which  Mr.  Kahn  uses  the  term. 

The  dictionary  also  says  that  the  “trading  class”  is  the 
middle  class.  Who  constitute  the  trading  class?  Surely 


18 


The  New  Capitalism 


in  the  United  States  tradespeople  do  not  constitute  the 
middle  class,  for,  according  to  the  United  States  Census 
Statistics  the  following  are  listed  under  the  designation 
Trade:  bankers,  brokers,  money-lenders;  clerks  in  stores; 
commercial  travelers;  delivery  men;  insurance  agents  and 
officials;  laborers  in  coal  and  lumber  yards,  warehouses, 
etc.;  laborers,  porters,  and  helpers  in  stores;  real  estate 
agents  and  officials;  retail  dealers;  salesmen  and  sales¬ 
women;  wholesale  dealers;  importers  and  exporters,  etc. 

J.  P.  Morgan  is  in  the  trading  class;  so  is  Barney 
Baruch;  so  is  John  D.  Rockefeller;  so  is  Julius  Rosen- 
wald ;  so  is  Otto  H.  Kahn.  But  J.  P.  Morgan,  and  Barney 
Baruch,  and  John  D.  Rockefeller,  and  Julius  Rosenwald, 
and  Otto  H.  Kahn — traders  though  they  be — are  distinctly 
not  of  the  middle  class,  socially  speaking.  Emphatically 
they  are  not  of  the  middle  class  economically  speaking. 

By  the  exclusion  of  the  wage  earner  from  the  middle 
class  Mr.  Kahn  arbitrarily  places  the  men  and  women  who 
work  with  their  hands  in  the  lowest  class.  That  there  are 
some — and  I  care  not  whether  you  make  it  ten  or  twenty 
percent  of  the  total,  or  more  or  less, — working  for  a  wage, 
or  perhaps  too  lazy  to  work  at  all,  and  who  may  be  put 
into  the  lowest  class  socially  considered,  I  freely  concede. 

But,  on  the  other  hand,  there  is  a  considerable  number 
of  idle  and  lazy  rich — men  and  women — “who  toil  not, 
neither  do  they  spin” — who  in  all  their  lives  have  never 
contributed  aught  to  the  sum  and  substance  of  human 
happiness;  who  have  produced  nothing;  who  have  added 
nothing  to  the  wealth  of  the  nation;  who  render  no  serv¬ 
ice  to  humanity ;  who  are,  plainly  speaking,  social  barnacles 
and  economic  parasites — where  will  Mr.  Kahn  place  these? 
In  the  upper,  or  the  middle,  or  in  the  lower  class?  Or 
will  he  put  them  in  a  class  by  themselves,  lower  even  than 
his  classification  of  the  wage  earners? 

Class  Contradictions 

If  there  wrere  only  two  social  groups,  one  would  naturally 
be  the  upper  and  the  other  the  lower  group ;  but  since  we 


The  Clash  of  the  Classes 


19 


divide  society  into  three  groups  or  classes,  then  one  is 
necessarily  the  uppermost  or  highest  class,  one  the  lowest 
class,  and  the  other  the  middle  class.  Verbal  accuracy,  if 
nothing  else,  it  seems  to  me,  demands  the  abrogation  of  the 
commonly  accepted  upper,  middle  and  lower  class  classi¬ 
fication  of  society,  and  dictates  designating  the  three  con¬ 
stituent  groups,  or  classes,  if  you  insist,  as  the  highest 
class,  the  middle  class,  and  the  lowest  class.  According 
to  Mr.  Kahn  and  others,  the  wage  earner  is  in  the  lowest 
class. 

What  is  it  that  puts  a  man  or  woman  into  the  highest 
class  ?  It  isn  ’t  intellect ;  it  isn ’t  character ;  it  isn ’t  culture ; 
it  isn’t  moral  perfection.  It  is  chiefly  wealth  plus  social 
position,  and  the  purchasable  concomitants,  such  as  fash¬ 
ionable  clothes,  a  magnificent  residence,  luxurious  sur¬ 
roundings,  a  retinue  of  servants,  leisure,  etc.  None  will 
deny  that  one  belonging  to  the  highest  class  of  society, 
may  at  heart  be — and  many  of  them  are — reprobates.  In¬ 
tellectually  they  may  be  nonentities,  absolutely  character¬ 
less,  deficient  in  culture,  lacking  in  refinement,  devoid  of 
the  finer  qualities,  and  morally  below  par.  Yet  none  thus 
far  has  challenged  their  inclusion  in  the  highest  class. 

I,  for  one,  cannot  subscribe  to  a  group  arrangement  that 
deliberately  ignores  the  better  qualities  in  individuals,  or 
in  groups.  My  intelligence  refuses  to  accept  as  scientific 
a  classification  based  wholly  on  the  possession  of  wealth, 
and  all  that  a  plethora  of  riches  implies.  My  sense  of  jus¬ 
tice,  or  shall  I  say,  my  common  sense,  rejects  a  stratifica¬ 
tion  of  society  that  takes  no  account  of  intellect,  or  of  char¬ 
acter  and  the  simple  virtues  which,  none  will  deny,  weigh 
heavy  in  the  scale  of  human  values. 

The  Middle  Group 

In  plain  English,  I  protest  against  the  mass  inclusion  of 
all  wage  earners  in  the  lowest  class.  Until  those  who  can 
speak  with  authority — be  they  scientific  sociologists,  or 
just  plain  blunt  men  like  Mr.  Kahn — are  willing  to  go  on 
record  as  saying  that  probity  and  nobility  of  soul,  goodness 


20 


The  New  Capitalism 


of  heart,  cleanness  of  mind,  purity  of  conduct,  innate 
honesty,  a  sense  of  justice,  a  decent  regard  for  the  rights 
of  others — in  brief,  character  and  conscience — are  of  no 
social  value,  I  shall  insist  on  placing  a  considerable  num¬ 
ber  of  the  wage  earners — most  of  them  respectable  and 
useful  members  of  society,  and  who  in  the  aggregate  have 
contributed  vastly  more  to  the  nation’s  progress  than  the 
contingents  socially  higher, — into  the  middle  class.  It 
does  not  matter  whether  they  work  with  their  hands  or 
their  head;  whether  for  a  weekly  wage  or  a  fixed  salary, 
or  for  an  irregular  honorarium.  If  the  income  of  these 
workers  with  brain  or  brawn  is  not  large,  whose  fault  is 
it?  If  their  “moderate  income”  does  not  permit  them  to 
cut  much  of  a  figure  socially,  who  is  to  blame?  If  the 
meager  wage  or  inadequate  salary  allowed  by  the  Capital¬ 
istic  System  compels  millions  of  men  and  women  to  live  in 
humble  homes  and  amid  unpretentious  and  unaristocratic 
surroundings,  not  to  say  squalor,  it  is  despicable  of  any 
constituent  member  of  the  Capitalistic  group  to  turn  up 
his  nose  at  them. 

To  Mr.  Kahn,  and  whoever  essays  to  write  on  this  sub¬ 
ject,  I  say,  with  emphasis:  “You  shall  not  place  the 
decent  men  and  women  of  the  United  States  into  the  lowest 
class  simply  because  they  work  for  a  wage,  or  the  equiva¬ 
lent  of  a  wage.  They  are  of  the  middle  class!  They  are 
the  middle  class.  Remove  them  and  your  so-called  highest 
class  will  fall,  socially  and  economically,  into  an  abyss 
deeper  than  hell.” 

The  Dead  Past  and  Its  Dead 

It  is  difficult  for  some  people  to  understand  that  we  are 
living  neither  in  feudal  times  nor  in  the  days  of  Louis 
XIV.  They  seem  to  forget  that  the  American  Revolution 
of  1776,  once  and  for  all,  wiped  out  all  invidious  class  dis¬ 
tinctions,  at  least  in  the  United  States,  when  politically  it 
placed  the  nation  on  a  common  footing.  What  else  does 
the  term  “democracy”  signify?  They  seem  to  forget  that 
the  French  Revolution  of  1789,  taking  courage  from  our 


The  Clash  of  the  Classes 


21 


own  example,  in  accents  none  too  mild  repudiated  class 
distinctions  with  the  words — liberte,  equalite,  fraternite. 
Indeed  the  French  Revolution  was  an  endeavor  to  equalize 
the  classes  by  entirely  eliminating  the  uppermost  class — 
the  nobility — the  aristocracy,  which,  as  we  are  reminded 
in  Thiers’  “The  French  Revolution”  had  “built  up  a 
wall  of  demarcation  between  themselves  and  the  rest  of 
the  Community,  as  if  they  were  fashioned  of  more  ‘  precious 
porcelain’.”  And  is  there  no  lesson  to  be  found  in  the 
more  recent  Revolution  in  Russia? 

The  Daivn  of  a  New  Day 

It  is  difficult  for  some  people  to  comprehend  that  within 
the  last  century  vital  and  tremendous  changes  have  taken 
place  in  the  civilized  world,  and  that  the  political  upheavals 
observable  everywhere  today  are  but  the  pains  of  parturi¬ 
tion  preceding  the  birth  of  a  new  social  and  economic 
order. 

At  least  in  the  United  States  let  it  be  understood  that  in 
this  year  of  our  Lord  1922,  we  have  neither  feudal  lords, 
nor  barons,  neither  a  nobility  nor  an  aristocracy,  and  cer¬ 
tainly  we  who  work  for  a  wage  or  salary,  or  its  equivalent, 
refuse  to  allow  ourselves  to  be  hurled  back  into  what  it 
would  please  some  to  designate  economically,  the  peasant 
or  serf  class,  socially  the  lowest  group. 

Those  who  have  a  passion  for  making  class  distinctions, 
and  particularly  those  who  look  upon  the  wage  workers 
as  our  lowest  class,  socially  and  economically,  might  with 
profit  ponder  on  these  words  spoken  by  President  Harding 
in  his  Inaugural  Address:  “Our  fundamental  law  recog¬ 
nizes  no  class,  no  group,  no  section.  There  must  be  none 
in  legislation  or  administration.  The  supreme  inspiration 
is. the  common  weal.” 


CHAPTER  III 
The  New  Division 


BUT  to  sweep  aside  the  old  and  generally  accepted 
division  of  society  into  classes,  places  upon  me  the 
obligation  to  propose  an  entirely  new  classification, 
or  rather  group  division,  a  division  that  has  none  of  the 
objectionable  features  of  the  old  classification — a  division 
that  is  new  and  altogether  more  scientific.  Above  all  it 
must  be  a  division  that  concerns  itself  wholly  with  eco¬ 
nomic  society — therefore  an  economic  group  arrangement 
that  is  reducable  to  approximate  figures  and  easily  divisible, 
something  that  is  altogether  impossible  in  what  might  be 
called  a  half  social  and  half  economic  classification  or 
grouping,  under  which  the  several  members  of  the  same 
family  might  belong  to  the  three  distinctive  social  classes. 
Thus,  for  example :  the  father  may  be  a  lawyer,  which  will 
place  him  socially  in  the  middle  class;  the  son  may  be  a 
wage  earner,  which  fact  would  thrust  him  into  the  lowest 
social  class;  and  the  daughter  may  marry  a  multi-million¬ 
aire,  which  would  automatically  determine  her  social  status 
in  the  uppermost  class.  But  in  a  statistical  division  that  is 
primarily  economic  no  social  violence  is  implied ;  the  transi¬ 
tion  from  the  one  economic  group  to  the  other  group 
involves  no  medley  of  social  contradictions. 

Producer  and  Consumer 

In  past  decades,  loose  economic  writers,  who  preferred 
to  deal  with  nicely  sounding  words  and  their  opposites, 
rather  than  with  fairly  accurate  terms,  writers  who  troubled 
themselves  not  at  all  with  definitions,  have  been  wont  to 
loosely  divide  economic  society  into  two  motley  groups, 
namely,  Producer  and  Consumer;  and  even  to  this  day  we 


22 


The  New  Division 


23 


hear  them  used  by  writers  and  speakers  as  if  there  attached 
to  them  any  scientific  economic  significance.  A  moment’s 
reflection  would  establish  that  the  classification  is  altogether 
irrelevant. 

Who  are  the  producers?  How  many  among  the  forty 
million  men,  women  and  children  listed  as  engaged  in  the 
‘‘gainful  occupations”  can  be  called  producers  in  the  real 
sense  of  the  word  ?  After  an  analysis  of  the  available  sta¬ 
tistics  I  will  say  approximately  one-third,  certainly  less 
than  one-half,  could  be  called  producers.  The  producer 
group,  as  used  in  economic  literature,  therefore  excludes 
a  majority  of  those  engaged  in  gainful  occupations.  Conse¬ 
quently,  since  no  account  is  taken  of  the  large  number  who 
cannot  be  classed  as  ‘  ‘  producers,  ’  ’  the  unscientific  character 
of  the  producer  and  consumer  division  becomes  at  once 
apparent.  If  only  those  who  actually  produce  something 
are  called  producers,  some  cognizance  must  be  taken  of 
those  who,  though  working,  are  not  engaged  in  production 
operations.  A  farmer,  a  miner,  a  steel  worker,  a  baker, 
can  be  called  a  producer;  but  a  boot-legger,  a  policeman, 
a  railroad  conductor,  or  a  chauffeur,  cannot  be  called  a 
producer  in  the  strict  sense  of  the  word.  To  call  every 
worker,  whether  he  produces  or  not,  a  producer,  is  highly 
inaccurate. 

The  entanglement  becomes  even  more  obvious  when  we 
encounter  the  word  consumer,  sometimes,  for  the  sake  of 
emphasis  perhaps,  the  ultimate  consumer.  The  irrelevancy 
of  the  economic  producer  and  consumer  division  is  imme¬ 
diately  apparent  when  we  remember  that  the  producer  is 
at  the  same  time  a  consumer — producing  eight  hours  a  day 
and  consuming  during  sixteen  hours  of  the  day ;  in  fact,  he 
is  a  consumer  even  while  he  produces.  But  the  production 
part  of  the  formula  is  not  predicable  of  all  the  consumers ; 
whereas  the  consumption  part  is  predicable  of  all,  whether 
they  be  producers  or  non-producers,  workers  or  idlers. 
Only  a  percentage  of  the  working  group  are  producers; 
but  one  hundred  percent  of  the  population  are  consumers. 

Clearly,  then,  the  designations  “producer”  and  “con- 


24 


The  New  Capitalism 


sumer”  cannot  be  used  appropriately,  because  millions  of 
those  engaged  in  work  cannot  be  called  producers  in  the 
literal  sense  of  the  word.  All,  however,  are  consumers. 
Even  the  retired  millionaire  is  a  consumer ;  he  consumes  as 
well  as  the  wage  earner.  But  the  role  of  consumer  makes 
no  irksome  demand  on  the  millionaire.  Consuming,  to 
him,  is  no  hardship,  no  trial,  no  tribulation.  What  he  con¬ 
sumes  does  not  exhaust  his  income ;  it  makes  no  inroads  on 
his  wealth;  it  does  not  interfere  with  his  further  wTealth 
accumulations ;  it  does  not  disturb  his  capital  funds.  After 
a  most  liberal  consumption  most  of  his  income  remains  to 
be  invested  by  him  in  sundry  profitable  enterprises  which 
will  yield  for  him  in  the  following  year  another  uncon¬ 
sumable  quantity  of  wealth,  and  increase  of  capital. 
Certainly  he  does  not  deserve  to  be  mentioned  in  the  same 
class  with  the  wage  earner  consumer,  or  the  small  salaried 
consumer,  who  in  the  course  of  the  year  consumes  prac¬ 
tically  all  he  earns;  whose  wages,  or  salary,  is  his  only 
income;  who  has  no  investments,  no  income  from  any  other 
source  than  the  labor  of  his  hands  or  his  head.  All  he 
earns,  generally  a  limited  and  stipulated  amount,  he  is 
compelled  to  spend  merely  in  order  that  he  and  his  family, 
or  those  dependent  upon  him,  may  have  a  roof  over  their 
heads,  clothes  to  wear  and  food  to  eat.  He  lives  from  hand 
to  mouth.  A  month  of  idleness,  or  illness;  a  sick  wife  or 
child;  or  a  death  in  the  family,  will  cast  him  down  and 
plunge  him  into  debt.  Once  and  for  all  I’ll  dismiss  the 
"Producer -Consumer  division  as  a  sloppy,  slippery  economic 
makeshift,  illuminating  nothing,  clarifying  nothing,  settling 
nothing,  describing  nothing. 

Bourgeoisie  and  Proletariat 

European  economic  literature  abounds  with  the  quasi- 
scientific  terms  Bourgeoisie  and  Proletariat.  We  have 
heard  them  frequently  spoken  of  in  connection  with  Social¬ 
ism  in  Germany,  Syndicalism  in  France,  Bolshevism  in 
Russia,  etc.  I  seriously  question  whether  their  use  is  scien¬ 
tifically  justified ;  but  since  I  do  not  mean  to  concern  myself 


The  New  Division 


25 


with  the  economic  problems  of  Europe,  I  will  accept  them, 
as,  perhaps,  applicable  to  economic  conditions  in  Europe, 
but  they  certainly  cannot  be  employed  with  any  degree  of 
appropriateness  in  the  United  States.  In  fact  I  reject  the 
two  terms  peremptorily,  basing  my  present  rejection  on  the 
authority  of  the  dictionary,  which  defines  them  as  follows : 

Bourgeoisie — The  middle  class  of  Society;  especially  in 
France;  used  collectively. 

Proletariat — 1.  In  earlier  usage,  the  indigent  classes, 
collectively  of  a  community  or  a  state,  including  day 
laborers  and  all  other  persons  without  capital  or  assured 
means  of  support:  Kegarded  in  ancient  Kome  as  con¬ 
tributing  to  the  state  nothing  but  offspring;  the  lower 
classes;  peasantry;  rabble.  2.  In  modern  socialistic  use, 
the  wage  workers  of  a  state  or  of  the  world,  collectively, 
regarded  as  the  producers  of  capital  and  creators  of 
wealth;  the  laboring  classes;  working  men. 

To  still  further  emphasize  the  inapplicability  of  the 
terms  to  the  economic  conditions  in  the  United  States,  one 
has  but  to  glance  at  the  definition  of  bourgeois  and  prole¬ 
tarian.  The  same  dictionary  defines  them  as  follows: 

Bourgeois — Of  or  pertaining  to  the  commercial  or 
middle  class  as  distinguished  from  gentle  or  noble;  among 
modern  Socialistic  writers  often  used  in  opposition  to 
working  class  or  proletariat,  or  to  characterize  a  system 
of  commercialism. 

Proletarian — A  person  of  the  lowest  or  poorest  class. 

I  shall  waste  no  further  words  on  this  strictly  European 
division  of  economic  society,  beyond  saying  that  it  is  inad¬ 
missible  in  the  United  States. 

Drawing  the  Line  of  Demarcation 

What,  then,  is  a  reasonably  accurate  and  fairly  scientific 
economic  division — one  that  will  stand  the  test  of  analysis 
and  at  the  same  time  be  computable  in  figures  and  per¬ 
centages?  I  may  be  in  error  when  I  say  that  the  only 
economic  division  that  will  fit  the  case  exactly  is  the  one  I 
am  about  to  make ;  but  I  am  not  in  error  when  I  claim  that 
my  division  is  better  and  more  nearly  descriptive  of  actual 
conditions  than  any  thus  far  made  by  any  economic  writer. 
On  that  contention  I  stand  pat.  My  division  may  be  sus- 


26 


The  New  Capitalism 


ceptible  of  improvement,  bnt  as  it  stands  I  claim  for  it  that 
it  is  distinctively  economic,  and  not  an  olla  podrida  classi¬ 
fication,  part  social,  part  economic,  with  a  strongly  political 
flavor  spoiling  the  broth  altogether. 

What  it  pleases  some  to  call  civilized  society  was  orig¬ 
inally  composed  of  only  two  classes — those  who  ruled  and 
those  who  were  ruled.  The  economic  relationship  between 
them  was  that  of  master  and  slave.  But  in  due  time  grad¬ 
ual  economic  changes  gave  rise  to  another  group,  which 
became  known  and  is  still  spoken  of  by  economic  writers, 
as  the  middle  class.  The  very  word  society  is  an  aristo¬ 
cratic  term,  and  I  hesitate  to  use  it  when  speaking  of  what 
the  economists  consider  the  lowest  class  of  men  and  women, 
those  who,  we  are  told,  constitute  a  group  by  themselves  and 
who  are  in  no  sense  any  part  of  the  social  machine,  except 
to  serve  those  who  are  society.  The,  difference  is  that  in 
former  centuries  those  who  served  had  no  claim  whatever 
on  those  they  served;  whereas  today  the  servants  have  at 
least  a  right  to  demand  pay  for  their  services.  It  is  this 
very  thing,  namely,  that  pay  must  be  accorded  those  who 
serve,  that  has  given  to  society  its  economic,  not  to  say 
mercenary,  character.  It  is  this  very  thing  that  has  enabled 
a  number  of  those  who,  economically,  were  of  tl\e  lowest 
class,  to  lift  themselves  into  a  somewhat  more  favorable 
position  and  thereby  improve  their  social  status. 

It  is  not  my  intention  to  trace  the  economic  development, 
interwoven  with  that  of  society,  either  in  Europe  or  in  the 
United  States.  For  the  sake  of  brevity,  therefore,  I  accept 
the  middle  class  as  a  purely  social  group,  while  maintaining 
that  many,  if  not  all,  of  those  who  labor  for  a  wage,  have  a 
right  to  claim  membership  therein.  But  since  there  is,  and 
can  be,  no  agreement  as  to  who  might  be  included  and  who 
denied  admission;  since  there  are  differences  of  opinion  as 
to  where  the  dividing  line  is  to  be  drawn ;  and  since  no  one 
has  ever  ventured  to  compile  a  set  of  statistics  from  which 
one  might  fairly  approximate  who  and  how  many  belong 
to  the  highest  class ;  and  who  and  how  many  to  the  middle 
class;  and  who  and  how  many  to  the  lowest  class,  I  am 


The  New  Division 


27 


persuaded  to  make  an  economic  classification  all  my  own, 
and  one  which,  I  think,  fits  in  more  accurately  with  the 
Capitalistic  character  that  society  has  acquired  in  the 
United  States  within  recent  years.  Instead  of  dividing  the 
population  into  three  social  classes — upper  (or  highest), 
middle,  and  lower  (or  lowest) — I  will  divide  it  into  two 
economic  groups,  which  I  shall  call  the  INVESTOR 
GROUP,  and  the  NON-INVESTOR  GROUP. 

This  purely  economic  group  division  seems  to  me  alto¬ 
gether  preferable  in  the  discussion  of  a  subject  which  is 
wholly  economic,  and  concerns  itself  chiefly  with  the  eco¬ 
nomic  relationship  existing  between  the  several  contingents 
that  go  to  make  up  the  social  amalgam. 


CHAPTER  IV 

The  Investors  and  the  Non-Investors 


FOR  the  -purposes  of  this  book,  then,  I  shall  divide 
the  population  of  the  United  States  into  two  distinct 
economic  groups — the  investor  group  and  the  non¬ 
investor  group,  and  make  an  attempt  at  numerical  classi¬ 
fication  and  apportionment.  According  to  the  latest  United 
States  Census  Statistics,  the  population  of  the  United 
States  is  106,418,175.  There  are  24,351,676  families;  an 
average  family  is  composed  of  4.3  persons.  But  in  order  to 
simplify  my  subject  for  the  reader,  and  because  practically 
all  statisticians  and  economists  have  used  five  persons  as 
constituting  an  average  family,  I  am  going  to  make  my 
computations  as  if  the  population  were  one  hundred  mil¬ 
lion,  and  the  size  of  the  average  family  five  persons — and 
therefore  twenty  million  families.  How  many  of  this 
number  are  investors? 

Family  Income  Statistics 

The  statistics  show  that  in  1910  over  ninety  percent  of 
the  families  in  the  United  States  had  an  income  of  less  than 
$1500  a  year.1  It  is  a  safe  guess  that  there  are  not  many 
investors  to  be  found  among  them.  It  is  likely  that  in  1917, 
1918  and  1919  the  amount  of  income  of  these  families  was 
considerably  greater,  but  the  increase  in  income  was 
absorbed  by  the  increase  in  living  costs,  and  therefore  did 
not  materially  alter  the  situation  as  far  as  investments  are 
concerned.  We  must,  therefore,  look  for  our  investors 
among  the  remaining  ten  percent  of  the  families. 

1  According1  to  the  income  statistics  for  1910,  computed  by  Prof. 
Willford  Isbell  King,  51.54  percent  of  the  families  had  an  income  of 
less  than  $500  a  year,  30.15  percent  between  $800  and  $1200,  and  8.62 
percent  between  $1200  and  $1500.  (See  table  XL.IV.  p.  228,  “The 
Wealth  and  Income  of  the  People  of  the  United  States.”) 

28 


The  Investors  and  the  Non-Investors  29 


A  Glance  at  Income  Tax  Statistics 


But  he  would  be  a  reckless  statistician  who  would  con¬ 
clude  that  ten  percent  of  the  families  are  investor  families ! 
The  “Statistics  of  Income’’  for  19182  show  that  only 
4,425,114  individuals  filed  an  income  tax  report  in  that 
year.  Of  this  number  1,516,938,  or  34.28  percent,  were  in 
the  class  whose  income  was  between  $1000  and  $2000 ;  and 
1,496,878,  or  33.83  percent  in  the  class  whose  income  was 
from  $2000  to  $3000.  While  beyond  a  doubt  there  are  some 
investors  among  the  three  million  in  these  two  classes  the 
statistics  (Table  7)  show  that  “dividends”  and  “interest 
and  investment  income”  constituted  a  minimum  of  their 
income.  The  remaining  1,411,298  who  reported  incomes 
from  $3000  to  over  a  million,  could  more  properly  be  said 
to  constitute  the  investor  group. 


Getting  Down  to  Business 


But  I  am  trying  to  put  our  best  investor  foot  forward, 
and  am  desirous  to  make  the  group  as  large  as  possible. 
In  the  absence  of  definite  statistics  I  will  quote  from  the 
writings  of  a  man  who  can  be  said  to  speak  with  authority. 
Charles  M.  Schwab,  Chairman  of  the  Bethlehem  Steel  Cor¬ 
poration,  in  an  article  in  Collier’s  Weekly  (December  11, 
1920),  said: 

“Three  years  ago  a  survey  of  280  leading  railway  and 
industrial  corporations  disclosed  that  their  securities  were 
owned  by  more  than  a  million  and  a  half  of  people.  With 
the  large  purchasing  of  securities  since  the  close  of  the  war, 
a  census  taken  today  would,  I  believe,  show  that  at  least 
two  and  a  half  million  people  own,  as  investors,  rights  in 

-  Number  in 

2  Income  Classes  Each  Class 


$1000  to  $2000 . 

$2000  to  $3000 . 

$3000  to  $5000 . 

'  $5000  to  $10,000 . 

$10,000  to  $25,000 _ 

$25,000  to  $50,000 _ 

$50,000  to  $100,000.  .  . 
$100,000  to  $150,000.  . 
$150,000  to  $300,000.  . 
$300,000  to  $500,000.  . 
$500,000  to  $1,000,000 
$1,000,000  and  over... 


1,516,938 

1,496,878 

932,336 

319,356 

116,569 

28,542 

9,996 

2,358 

1,514 

382 

178 

67 


30 


The  New  Capitalism 


the  profits  of  what  is  called  ‘big  business/  If,  therefore, 
big  business  is  in  a  conspiracy  against  the  people,  quite  a 
number  of  the  people  seem  involved  in  it.” 

When  Mr.  Schwab  speaks  of  two  and  a  half  million  in¬ 
vestors  he  does  not  take  into  consideration  that  many  of 
the  security  holders  he  speaks  of  are  security  holders  in 
a  number  of  corporations;  that  is  to  say,  the  same  names 
appear  repeatedly  in  different  investor  lists.  Which  being 
the  case  I  would  be  justified  in  making  a  considerable 
reduction  on  account  of  duplications.  But  instead  of  reduc¬ 
ing  the  number  of  investors — individuals  and  families — by 
a  half  million  or  more,  as  I  believe  could  be  done  in  all 
fairness,  I  prefer  to  deliberately  enlarge  upon  Mr.  Schwab ’s 
estimate,  and  to  settle  upon  a  figure  that  will  include  all 
investors,  of  whatever  kind. 

For  the  purposes  of  this  book  I  am  going  to  say  that 
there  are  four  million  investors — or  rather  four  million 
families,  comprising  twenty  million  of  the  population. 
Many  investors  are  probably  investors  in  businesses  of  their 
own.  On  the  other  hand  some  of  the  security  holders  may 
be  lawyers,  physicians,  dentists,  editors,  etc. ;  many  of  them 
are  manufacturers,  merchants,  tradespeople,  farmers,  etc. 
In  other  words,  whatever  dividends  or  interest  they  may 
derive  from  security  holdings  is  additional  to  an  income 
derived  from  other  pursuits  or  sources.  Then,  too,  there 
are  men,  and  women,  who  are  not  actively  engaged  in  busi¬ 
ness  ;  who  have  sold  out  their  business  interests  for  cash,  or 
are  retired,  or  who,  through  inheritance,  have  been  enabled 
to  invest  in  real-estate  or  securities  of  various  kinds,  and 
who  are  conspicuous  in  the  investor  group. 

To  say  that  there  are  four  million  investors  of  all  kinds 
in  the  United  States,  is,  to  my  way  of  thinking,  a  very 
liberal  estimate,  particularly  when  we  remember  that  from 
eighty  to  ninety  percent  of  the  families  have  an  income  just 
about  sufficient  to  enable  them  to  live ;  and  who  do  not  share 
appreciably  in  the  national  wealth.  This,  at  least,  is  the 
conclusion  one  would  arrive  at  from  a  correlation  of  the 
statistics  pertaining  to  Income,  Wealth,  Occupations,  and 


The  Investors  and  the  Non-Investors  31 


Income  Tax.  Moreover,  as  we  have  seen,  only  four  and  a 
half  million  individuals  filed  income  tax  reports  in  1918, 
three  million  of  whom  reported  that  a  very  small  part  of 
their  income  was  derived  from  investment. 

But  when  we  speak  of  four  million  investors  in  the  United 
States  we  must  keep  in  mind  several  things  which  tend  to 
modify  the  claim :  First,  that  while  there  may  be  four  mil¬ 
lion  investors  on  all  the  lists,  beyond  a  doubt  many  names 
are  duplicated,  that  is  to  say,  the  same  names  are  repeated 
over  and  over.  Second,  that  many  of  the  “investors”  in 
American  securities  are  foreigners.  It  has  been  said  that 
European  investors  have  from  eight  to  twelve  billions 
invested  in  the  United  States.  Third,  that  many  citizens 
of  the  United  States,  whose  names  appear  in  investors’ 
lists,  have  invested  in  foreign  securities  and  enterprises. 
A  financial  writer  recently  stated  that  “American  invest¬ 
ments  in  Canada  total  two  billion  dollars.”  It  would  be 
interesting  to  know  exactly  how  much  capital  citizens  of 
the  United  States  have  invested  in  foreign  enterprises  or 
securities. 

But  in  spite  of  all  these  things  I  will  continue  to  consider 
the  investor  group  as  composed  of  four  million  individuals, 
families  or  estates,  comprising  twenty  million  persons.  Nor 
will  I  particularly  stress  that  of  a  considerable  number  of 
families  it  can  be  said  that  every  member  is  an  investor. 
I  ’ll  go  a  step  further  and  say  that  these  four  million  invest¬ 
ors,  to  all  intents  and  purposes,  own  and  control  practically 
all  of  the  valuable  productive  and  profit-yielding  prop¬ 
erties  in  the  United  States ;  all  the  businesses ;  banks,  trans¬ 
portation  systems,  insurance  companies,  public  utilities, 
mines,  factories,  stores,  real  estate,  etc.8 

We  may  now  state  the  case  as  follows: 

THE  INVESTOR  GROUP  is  composed  of  four  million 
investors — let  us  say — four  million  families  of  five  members 
each;  therefore  twenty  million  men,  women  and  children 

*  For  reasons  that  I  explain  later  in  this  chapter,  I  am  excluding 
the  farmer  from  the  Investor  Group. 


32 


The  New  Capitalism 


are  included  in  tlie  investor  group.  Twenty  percent  of  the 
population  constitute  the  investor  group. 

THE  NON-INVESTOR  GROUP  is  composed  of  sixteen 
million  families — a  total  of  eighty  million  men,  women  and 
children ;  or  eighty  percent  of  the  population. 

Liberty  Bond  Investors 

Let  not  some  smart  aleck  triumphantly  shout  that  he  has 
me  on  the  hip — that  I  have  misstated  facts — that  there  are 
not  only  four  million  but  nearer  twenty  million  investors, 
in  the  United  States,  for  did  not  millions  of  men  and  women 
in  the  United  States  purchase  Government  bonds — Liberty 
or  Victory  bonds?  Roger  Babson,  who  is  looked  upon  as 
an  authority  on  economic  matters,  and  as  a  statistical 
expert,  said  in  January,  1921,  that  eighty  percent  of  the 
original  purchasers  are  still  holding  their  bonds.  A  few 
weeks  later  George  M.  Reynolds,  former  President  of  the 
Continental  and  Commercial  Bank,  said  that  about  fiftv 
percent  of  the  original  bond  purchasers  still  hold  their 
bonds.  I  do  not  know  upon  what  data  Messrs.  Babson  and 
Reynolds  base  their  conflicting  statements;  but  let  us  not 
cavil — let  us  compromise  by  saying  that  more  than  half  of 
those  who  bought  Liberty  and  Victory  bonds  are  still 
holding  them. 

But  why  are  they  holding  them  ?  It  would  be  fine  if  we 
could  say  in  stentorian  tones  that  they  are  holding  them  for 
patriotic  reasons.  But  throwing  dust  into  my  own  eyes  is 
not  one  of  my  accomplishments — and  I  am  incapable  of 
lying  to  myself.  If  approximately  one-half  of  the  original 
bond  purchasers  are  still  holding  the  bonds  they  purchased 
— they  are  holding  them  primarily  because  they  cannot 
dispose  of  them  except  at  a  loss.  If  you  insist  on  speak¬ 
ing  of  those  who  bought  Liberty  and  Victory  bonds  as 
1  1  investors,  ’  ’  I  am  going  to  insist  that  you  consider  the 
bonds  they  hold  as  nothing  more  than  an  investment;  in 
which  case  I  shall  tell  you  that  from  an  investing  stand¬ 
point  Liberty  and  Victory  bonds  were  a  poor  investment. 

Until  the  latter  part  of  1921  the  bonds  they  purchased  at 


The  Investors  and  the  Non-Investors  33 


$100  (many  buying  them  on  the  instalment  plan  and  paying 
interest  thereon  from  date  of  purchase)  were  quoted  in  the 
market  as  low  as  $88.00.4  Let  us  have  done  with  hypocrisy 
and  camouflage.  Hard  though  it  may  he,  let  us  at  least  be 
honest  with  ourselves.  If  the  truth  must  be  told  many  of 
those  who  bought  either  Liberty  or  Victory  bonds  were 
forced  to  buy  them — they  had  no  alternative.  Charles  G. 
Dawes,  in  charge  of  the  Liberty  bond  sales  in  Chicago,  said 
to  his  salesmen :  “If  any  man  refuses  to  buy  a  bond,  knock 
him  down.”  The  Congressional  Record  is  full  of  stories  of 
citizens  who  were  forced  to  buy  the  quantity  allotted  to 
them  by  the  salesmen.  A  queer  kind  of  investor,  who  is 
compelled  to  buy,  nolens  volens.  A  queer  kind  of  invest¬ 
ment  that  is  compulsory  upon  many  who  could  not  afford 
to  buy,  but  who  would  have  been  punished  by  loss  of  their 
job — or  who  would  have  been  insulted  and  reprobated,  or 
jailed  or  killed,  had  they  refused.  The  less  we  say  of  the 
manner  in  which  thousands  of  citizens  were  coerced  into 
becoming  4  ‘  investors  ’  ’  the  better.  I  mention  all  these  things 
for  the  benefit  of  those  economic  writers  and  analysts  who 
might  be  tempted  into  an  endeavor  to  show  that  the  investor 
group  is  larger  than  I  have  declared. 

Professor  David  Friday,  in  his  “Profits,  Wages  and 
Prices”  says:  “Early  in  1919  the  sales  of  liberty  bonds 
through  private  channels  and  upon  the  New  York  Stock 
Exchange  reached  tremendous  proportions.  For  the  full 
year  these  sales  on  the  Exchange  totaled  three  billion  dol¬ 
lars,  and  for  the  first  four  months  of  1920  another  billion 
was  sold.  A  large  part  of  the  funds  derived  from  this 
source  were  devoted  to  the  purposes  of  ordinary  consump¬ 
tion,  rather  than  to  capital  expansion.” 

In  June,  1922  it  was  reported  that  over  three-fourths  of 
the  Liberty  and  Victory  bonds  were  now  in  the  hands  of 


Liberty  Bond  Prices 

in  New 

York,  April  8,  1921 : 

Liberty  S^s . 

90.26 

Liberty  4th  4*4s.... 

87.86 

Liberty  2d  4s . 

87.52 

Liberty  reg . 

87.70 

Liberty  1st  4s . 

87.90 

Victory  4%s . 

97.58 

Liberty  2d  4%s . 

87.86 

Victory  reg . 

97.44 

Liberty  reg . 

87.60 

Victory  3%s . 

97.58 

Liberty  3d  4*4s . 

91.00 

34 


The  New  Capitalism 


the  big  banks  and  investors,  who  had  bought  them  in  at  low 
figures.  About  the  same  time  Liberty  and  Victory  bond 
prices  went  up,  and  are  now  quoted  at  around  par. 

Tax  Evading  Investors 

Those  boastful  speakers  and  optimistic  writers  who 
delight  to  swell  the  number  of  investors,  might,  with  better 
grace,  speak  of  the  millions  of  “patriots”  who  since  the 
passing  of  the  Income  Tax  law  have  invested  heavily  in  tax 
exempt  securities,  state,  county,  municipal  and  even  foreign 
bonds.  Secretary  of  the  Treasury  Mellon,  in  his  annual 
report,  recently  stated  that  more  than  ten  billion  dollars 
are  invested  in  tax  exempt  securities.  Other  estimates  I 
have  seen  place  the  amount  thus  invested  between  twenty 
and  thirty  billions.  Professor  E.  R.  A.  Seligman,  before 
the  House  Ways  and  Means  Committee  on  the  resolution 
to  amend  the  Constitution  to  permit  the  Government  to  tax 
securities  which  are  now  exempt,  declared  that  unless  the 
Government  intervenes  within  a  few  years,  from  two  to 
three  billion  dollars  a  year  of  state  and  local  tax  exempt 
securities  will  be  issued. 

Investors  in  Homes 

But  there  are  those  who  will  insist  that  the  man  who 
owns  his  home  is  an  investor.  I  do  not  feel  disposed  to 
quarrel  with  those  who  put  forth  this  contention.  However, 
let  us  take  a  glance  at  the  statistics.  According  to  the 
Census  Bureau  Statistics  (published  October,  1921)  the 
total  number  of  homes  enumerated  in  1920  was  24,351,6.76. 
Of  this  number  13,247,313  families  were  renters,  6,667,113 
families  owned  their  homes,  while  4,271,544  families  had 
mortgages  on  their  homes.  Reduced  to  simpler  terms  54.4 
percent  of  the  families  live  in  rented  homes;  28.2  owned 
the  homes  they  occupy  free  of  incumbrance,  and  17.5  are 
occupants  of  homes  that  are  mortgaged.  (The  status  of 
285,243  homes  was  not  reported.) 

That  it  is  difficult  to  even  approximate  actual  conditions 
with  regard  to  the  ownership  and  tenancy  of  houses  and 


The  Investors  and  the  Non-Investors  35 

homes  may  be  judged  from  Chicago’s  housing  survey, 
according  to  which  out  of  the  nearly  three  million  persons 
living  in  Chicago  125,000  own  their  homes,  while  60,000 
persons  owned  145,914  apartment  buildings  occupied  by 
nearly  two  million  people. 

Beyond  a  doubt,  many,  if  not  all,  of  the  four  million 
investors,  own  their  homes;  many  of  them,  besides,  own 
buildings  occupied  by  tenants.  If  a  house  owner  occupies 
the  building  he  owns  himself  his  property  represents  an 
investment  indeed,  but  it  yields  him  no  revenue.  But  if  he 
,  owns  houses  in  addition  to  the  one  he  occupies,  he  takes  his 
place  among  the  landlords,  and  as  such  derives  an  income 
from  his  investment.  In  all  probability  many  of  the  four 
million  constituting  the  investor  group  are  landlords. 

Beyond  a  doubt,  also,  a  fair  percentage  of  those  I  have 
classed  as  non-investors  own  their  homes  outright.  In  that 
case  the  owner  simply  plays  the  double  role  of  landlord  and 
tenant.  Instead  of  paying  rent  to  a  landlord  he  pays  it  to 
himself.  The  amount  he  pays  out  for  taxes,  insurance, 
upkeep,  alterations  and,  computing  interest  on  the  amount 
tied  up  in  the  property  he  occupies,  is,  in  every  case,  the 
equivalent  of  rent. 

On  the  other  hand,  if  he  has  only  an  equity  in  the  prop¬ 
erty,  if  the  home  in  which  he  lives  is  mortgaged,  then  far 
from  being  an  investor  he  is  just  the  reverse — he  is  a 
debtor.  The  real  investors  are  those  who  hold  the  mortgage. 
It  is  the  mortgage  holder  who  derives  a  revenue  from  the 
non-investor’s  partial  ownership.  It  is  the  equity  holder 
who  pays  interest  on  the  unpaid  portion  of  the  property 
of  which  he  is  the  nominal,  but  not  the  actual,  owner.  The 
mortgage  holders  are  the  real  investors ;  not  the  mortgagor. 
Probably  if  all  data  could  be  obtained  it  would  be  revealed 
that  a  considerable  number  of  the  four  million  investors 
hold  mortgages  against  the  properties  in  which  many  non¬ 
investors  have  only  an  equity. 


36 


The  New  Capitalism 

Is  the  Farmer *  an  Investor  f 

Farm  owners  are,  of  course,  investors,  but  let  us  remem¬ 
ber  that  the  farmer  derives  his  income  from  his  joint  invest¬ 
ment  and  labor,  and  that  it  does  not  much  exceed,  and  in 
some  years  even  falls  below,  what  the  Government  calls  a 
subsistence  level  of  income. 

The  farming  industry  is  valued  at  eighty  billion  dollars, 
an  amount  greater  than  is  invested  in  all  the  railroads, 
manufactures  and  mines.  Yet  on  this  investment,  plus 
their  labor,  the  farmers  in  1912  realized  only  six  billion 
dollars,  or  (considering  that  there  are  more  than  six  mil¬ 
lion  farm  owners)  an  average  of  less  than  $1,000  per  farm 
owner.  This  amount,  mind  you,  represents  interest  on 
investment,  and  wages  for  labor  performed.  It  is  quite 
true  that  there  can  be  added  to  this  income  a  certain 
amount  for  the  item  of  rent;  and  likewise  an  amount  cov¬ 
ering  food  products  consumed  by  the  farmer  and  his  family. 
But  even  so,  surely  it  must  be  clear  that  the  farmers’  in¬ 
come  must  cover  interest  on  investment,  wages  for  labor 
performed,  and  whatever  allowance  may  be  made  for  the 
items  of  rent,  and  food  products  consumed,  so  that  the 
total  amount  of  average  income  per  farmer  is  hardly  more 
than  the  equivalent  of  an  industrial  worker ’s  family  income. 

The  U.  S.  Department  of  Agriculture  recently  studied 
farm  incomes  from  three  groups  of  farms  in  the  middle 
west;  Dane  County,  Wisconsin;  Washington  County,  Ohio; 
and  Clinton  County,  Indiana.  According  to  the  Farmers’ 
and  Drovers’  Journal ,  the  Department  of  Agriculture  ob¬ 
tained  the  following  results: 

“The  average  annual  income  from  Dane  County  farms 
over  five  years,  was  $1,293.  Of  the  185  farmers  in  the  three 
areas,  none  made  a  labor  income  of  $1000  for  every  year 
in  the  study,  but  18  in  the  Indiana  area  and  7  in  the  Wis¬ 
consin  area  made  labor  incomes  averaging  over  $1000  per 
year  for  the  period.  Four  farmers  (two  percent  of  the 
entire  number)  made  over  $500  labor  income  every  year. 
Averaging  labor  income  and  loss  over  the  whole  time,  15 


The  Investors  and  the  Non-Investors  37 


percent  of  the  farmers  failed  to  make  any  labor  income  at 
all.  Ten  percent  failed  even  to  make  five  percent  interest 
on  investment  in  any  year  of  the  study. 

/'The  average  return  on  investment  increased  from  about 
four  percent  in  1913  to  seven  percent  in  1918.  But  most 
of  the  farmers  made  less  than  $500  a  year  over  the  things 
the  farm  furnished  toward  the  family  living.  It  was  ap¬ 
parent  to  department  officials,  therefore,  that  few  farmers 
are  making  large  profits.’ ’ 

At  the  hearings 5  before  a  subcommittee  of  the  Com¬ 
mittee  on  Interstate  Commerce,  Mr.  E.  A.  Calvin,  of  Hous¬ 
ton,  Texas,  Washington  Representative  of  the  Cotton  State 
Board,  stated  that  “the  average  earnings  of  a  farmer  and 
his  family,  in  the  Southern  States,  where  cotton  is  grown, 
is  less  than  $750  per  annum — that  is  gross;  not  net.” 

Even  remembering  that  for  the  period  of  the  war,  when 
prices  of  farm  products  were  considerably  higher  than 
before  the  war,  the  aggregate  income  of  the  farmers  was 
18  billion  dollars  a  year — and  the  average  income  per 
farmer  can  be  said  to  have  been  $3000,  plus  his  rent  and  a 
certain  amount  of  living  commodities — it  must  also  be  re¬ 
membered  that  the  prices  of  all  commodities  which  the 
farmer  had  to  purchase  from  others  had  increased  in  the 
same  proportion,  thus  practically  leaving  him  no  better  off 
than  before  the  war.  At  any  rate  the  war  period  is  over; 
and  the  war  prosperity  of  the  farmer  has  come  to  an  abrupt 
end.  Taking  it  all  in  all,  at  least  for  the  purpose  of  this 
book,  I  consider  it  perfectly  legitimate  to  include  the  far¬ 
mers  in  my  non-investor  group,  since  from  all  appearances 
they  are  deriving  only  the  equivalent  of  wages  from  their 
joint  investment  and  labor. 

The  Investor  Group  and  Non-Investor 

Group  Divided 

The  investor  group  and  the  non-investor  group  are  sepa¬ 
rate  and  distinct,  and  hopelessly  divided.  There  are  hun¬ 
dreds  of  laws  specifically  protecting  the  rights  of  the  inves- 


5  May  20,  1920. 


38 


The  New  Capitalism 


tors,  but  no  specific  law  protecting  the  rights  of  the  non¬ 
investors.  The  courts,  under  the  aegis  of  those  laws,  are 
compelled  to  side  with  the  investor  as  against  the  non¬ 
investor.  I  think  I  am  safe  in  saying  that  there  are  no 
court  decisions  that  have  been  favorable  to  the  non-inves¬ 
tors. 

Not  only  are  there  no  laws  on  our  statute  books  that 
protect  the  non-investor  as  against  the  investor — there  are, 
on  the  contrary,  a  formidable  number  of  legal  enactments, 
state  and  federal,  that  are  distinctly  contrary  to  the  inter¬ 
ests  of  certain  contingents  within  the  non-investor  group 
— laws  destructive  of  natural  rights  or  depriving  non¬ 
investors  of  the  free  exercise  thereof;  curtailing  them,  en¬ 
joining  them,  circumscribing  them,  compelling  them.  This 
is  clearly  true  with  regard  to  the  laboring  group.  During 
the  past  few  years,  a  number  of  state  and  federal  laws  have 
been  passed,  or  proposed,  that  are  restrictive,  prohibitive 
or  coercive  measures,  directly  aimed  against  the  Labor 
group.  Among  these  may  be  mentioned  the  Lever  law; 
the  Esch-Cummins  Bill;  the  Poindexter  Anti-Strike  Bill; 
the  Calder  Bill;  and  such  by  law  established  institutions 
as  the  Kansas  Industrial  Court.  Then  there  are  adverse 
court  decisions,  for  example  the  recent  decision  of  the 
Supreme  Court  of  the  United  States  in  the  Duplex  Printing 
Press  Company  case,  and  which  decision  practically  de¬ 
stroys  the  Clayton  Act,  and  other  decisions  all  taking  away 
from  those  who  labor  the  exercise  of  their  natural  rights, 
or  depriving  them  of  legal  protection. 

A  Postscript 

You  may  find  fault  with  many  things  in  this  chapter; 
you  may  object  that  there  are  more  investors  than  I  claim. 
Very  well,  change  the  proportion  as  you  please.  But  you 
cannot  deny  that  dividing  the  population,  or  families,  of 
the  United  States  into  two  separate  economic  groups — 
investors  and  non-investors — is  a  step  forward,  and  in  the 
right  direction — a  better  group  arrangement  than  we  have 
at  present. 


CHAPTER  V 


The  Different  Kinds  of  Investors 

NTIL  someone  having  access  to  statistics  or  data  not 


available  to  me,  will  tell  ns  exactly  how  many  indi¬ 


vidual  investors  there  are  in  the  United  States,  I 
shall  adhere  to  my  estimate  of  fonr  million  investors  in  all 
forms  of  property,  except  farms.  From  this  number  I  will 
set  aside  one  million  whose  investments  are  probably  in 
things  other  than  corporate  securities.  This  leaves  three 
million  investors  in  the  securities  of  corporations.  You  will 
probably  recall  that  Charles  M.  Schwab  said  that  two  and 
a  half  million  persons  own,  as  investors,  rights  in  the  profits 
of  the  big  corporations.  My  estimate  of  three  million  is 
intended  to  cover  all  security  holders  in  all  corporations. 

Separating  the  Wheat  from  the  Chaff 

The  term  investor  is  used  in  a  rather  loose  sense  in  these 
Capitalistic  times.  It  is  applied  to  hundreds  of  thousands 
who  are  not  investors  in  any  sense  of  the  word.  Let  us 
make  an  attempt  at  clarifying  our  views  on  this  important 
point. 

There  is  a  considerable  number  of  persons  who  are  pro¬ 
fessional  speculators,  not  investors.  They  speculate  in 
stocks ;  they  buy  on  margin.  Their  profits  are  derived,  not 
from  the  industry  itself,  not  from  holding  the  securities  of 
corporations  in  order  to  annually  derive  a  dividend,  or 
interest,  but  from  the  repeated  buying  and  selling  of  securi¬ 
ties.  It  is  a  well  known  fact,  and  my  statement  will  hardly 
be  .disputed,  that  nine-tenths  of  all  stock  transactions  are 
of  a  speculative  character,  the  speculator  buying  one  day 
and  selling  the  next.  Senator  Cummins,  speaking  on  the 
floor  of  the  Senate,  September  1,  1913,  declared  that  90 


39 


40 


The  New  Capitalism 


percent  of  the  sales  (on  the  New  York  Stock  Exchange) 
were  purely  speculative. 

Moreover,  a  large  percentage  of  the  loans  made  by  the 
great  eastern  banks  is  for  the  purpose  of  speculation.  The 
following,  from  the  Chicago  Daily  News  (July  11,  1921) 
sheds  an  interesting  light  on  this  phase  of  our  subject : 

“It  is  estimated  that  the  daily  call  money  turnover  in 
the  New  York  market  is  now  only  $10,000,000  to  $15,000,- 
000,  against  a  normal  of  $40,000,000  to  $50,000,000.  The 
high  level  of  Wall  Street  borrowings  ran  to  $1,750,000,000 
in  July,  1919,  but  the  belief  is  that  it  runs  little  beyond 
$600,000,000  now.  Improvement  in  the  stock  exchange 
clearing  machinery  has  tended  to  reduce  the  amount  of 
money  necessary  to  transact  a  day’s  business.” 

The  annual  volume  of  purely  speculative  stock  transac¬ 
tions  can  be  gauged  by  this  rather  frank  admission.  Call 
loans  are  loans  made  for  a  short  time  to  the  professional 
speculators  in  stocks,  not  to  Iona  fide  investors.  They 
borrow  the  money  to  speculate  with,  buying  on  margin, 
never,  or  at  least  rarely,  paying  the  full  market  price  for 
the  number  of  shares  involved.  By  no  stretch  of  the  im¬ 
agination  can  one  who  borrows  money  for  the  purpose  of 
marginal  speculation  be  called-  an  investor.  Half  of  our 
difficulties  and  misunderstandings  would  disappear  if  we 
would  only  call  things  by  their  right  names.  The  difference 
between  a  speculator  and  an  investor  is  the  difference 
between  night  and  day ;  as  marked  as  the  difference  between 
a  skunk  and  a  robin. 

An  Estimate  of  the  Number  of  Speculative 

Investors 

It  would  be  interesting  and  illuminating  to  know  exactly 
how  many  speculative  “investors” — save  the  mark!  there 
are  in  the  United  States.  But  there  are  no-  statistics. 
Neither  are  the  professional  speculators  listed  in  the  sta¬ 
tistics  pertaining  to  “Occupations”  compiled  by  the  De¬ 
partment  of  Commerce,  and  which  purport  to  give  a  com¬ 
plete  record  of  everybody  “ten  years  of  age  and  upward 


The  Different  Kinds  of  Investors  41 


engaged  in  gainful  occupations,”  although  the  Census 
Statistics  for  1910  gives  23,600  commercial  brokers  and 
commission  men;  13,522  stockbrokers;  and  8,391  brokers 
not  specified,  and  promoters.  Beyond  a  doubt  the  specula¬ 
tors  in  securities — whether  you  call  them  speculative  in¬ 
vestors,  or  professional  speculators,  or  gamblers  in  securi¬ 
ties  is  to  me  immaterial — constitute  a  considerable  contin¬ 
gent  of  the  group  it  pleases  financial  writers  to  call 
investors. 

Let  us,  for  the  present,  say  that  one-half  of  the  three 
million  investors  are  of  the  speculative  kind — that  is  to  say, 
one  and  a  half  million  investors  are,  in  reality,  speculators, 
not  investors.  If  you  think  this  estimate  too  high,  or  too 
low,  change  it  to  suit  yourself.  I  shall  not  mind  it.  I  will 
even  allow  you  to  call  them  investors,  on  condition,  how¬ 
ever,  that  you  designate  them  as  mala  fide  investors  to 
distinguish  them  from  the  bona  fide  investors. 

The  Bona  Fide  Investors 

There  are  left,  then,  a  million  and  a  half  of  investors 
in  the  securities  of  the  various  corporations — men  and 
women  who  paid  cash  for  their  securities,  and  who  are 
content  with  a  reasonable  return  on  their  holdings.  These 
I  will  call  bona  fide  investors.  Most  of  them  are  small 
investors;  their  individual  holdings  are  not  large;  their 
collective  profits,  by  comparison  writh  the  profits  made  by 
the  speculative — or  mala  fide  investors,  are  negligible.  As 
far  as  the  industries  in  which  they  happen  to  have  invested 
are  concerned,  they  are  nonentities.  They  take  no  active 
part  in  any  of  the  industries.  They  know  nothing  about 
the  business  of  which  they  are  a  part  by  virtue  of  their 
holdings;  they  have  no  voice  in  its  management;  and 
nothing  at  all  to  say  about  the  companies’  policies.  They 
are  not  consulted;  an  expression  of  their  opinion  isn’t 
solicited;  their  advice  isn’t  sought;  and  if  it  were  volun¬ 
tarily  given  would  be  considered  as  an  impertinence.  They 
attend  no  conferences,  or  committee  or  directors’  meetings; 
not  even  the  stockholders’  meetings.  They  do  not  elect 


42 


The  New  Capitalism 


the  officers  or  directors.  Their  vote  is  never  cast  in  person ; 
always  by  proxy,  the  proxy  holders  being  invariably  an 
integral  part  of  the  corporation’s  personnel. 

The  U sefulness  of  the  Small  Investor 

There  is  apparent  at  the  present  time  a  concerted  en¬ 
deavor  on  the  part  of  ‘  ‘  Big  Business  ’  ’  to  increase  the  tribe 
of  small  stockholders.  Thus,  for  example,  we  read  edi¬ 
torially  in  the  Chicago  Journal  of  Commerce  (November 
9,  1920)  : 

“A  wider  distribution  of  the  stocks  among  small  inves¬ 
tors  is  the  campaign  of  corporations.  As  one  financial 
writer  put  it,  speaking  of  the  railroads,  ‘They  will  never 
get  public  opinion  behind  them  and  supporting  them  until 
they  have  a  great  body  of  small  stockholders  among  those 
who  use  their  service — the  farmer,  the  shopkeeper,  the 
commercial  traveler,  the  manufacturer.  They  have  got  to 
do  what  the  public  utilities  did  so  successfully,  entrench 
themselves  in  the  good  will  of  the  people  by  making  the 
public  financially  interested  in  their  successful  opera¬ 
tions.’  ” 

Those  who  constitute  ‘  ‘  Big  Business  ’  ’  long  ago  discovered 
that  the  best  way  to  control  public  opinion  and  curb  ad¬ 
verse  criticism,  is  to  make  a  considerable  portion  of  the 
public,  at  least  nominally,  co-partners  in  their  sundrv 
Capitalistic  exploitation  schemes. 

The  truth  of  the  matter  is  the  small  investor  is  a  conve¬ 
nience  to  the  big  corporations  rather  than  a  necessity. 
That  he  is  frequently  considered  as  a  necessary  evil  may 
be  concluded  from  the  ruthlessness  with  which  he  is  elimi¬ 
nated  whenever  his  continued  presence  is  construed  as 
obnoxious  or  superfluous.  One  has  but  to  examine  the 
records  pertaining  to  some  of  the  wrecked  railroad  proper¬ 
ties  of  the  United  States  to  discover  in  what  esteem  the 
small  investor  is  held.  For  all  practical  Capitalistic  pur¬ 
poses  the  small  investor  is  a  supernumerary — a  spear- 
bearer  ;  he  adds  impressiveness  to  the  play,  picturesqueness 
to  the  scene. 


The  Different  Kinds  of  Investors  43 


Women  Investors — Widows  and  Orphans 

Women  are  especially  desirable  among  the  small  inves¬ 
tors,  for  with  them  in  the  crowd,  particularly  when  they 
can  be  spoken  of  as  “widows  and  orphans,”  who  is  so 
ungallant,  so  unchivalrous,  so  bold  as  to  throw  stones  at 
them?  W.  W.  Atterbury,  Vice  President  of  the  Pennsyl¬ 
vania  Railroad  Company,  recently  declared  that  the  Penn¬ 
sylvania  Railroad  had  140,000  stockholders,  over  half  of 
whom  are  women. 

I  hardly  know  why  Mr.  Atterbury  so  insistently  stressed 
the  sex  of  a  majority  of  his  investors — for  investor  is  a 
noun — common  gender.  When  the  Pennsylvania  Railroad 
recently  reduced  its  dividend  rate  from  six  to  four  percent, 
did  the  women  stockholders,  “widows  and  orphans,”  fare 
better  than  the  men  stockholders?  Why  this  sex  emphasis? 
What  difference  does  it  make  whether  an  investor  is  male 
or  female,  Jew  or  Gentile;  his  or  her  color  black,  white,  red, 
or  yellow?  Yes!  What  difference  does  it  make?  Because 
an  investor  is  a  woman  does  that  make  the  investment  more 
sacred,  or  the  property  rights  more  inviolable?  The  laws 
of  economics  do  not  differentiate.  In  actual  business  prac¬ 
tice  a  female  is  grist  for  the  economic  mill  as  well  as  a 
male ;  as  great  a  profit  can  be,  and  is,  made  out  of  a  female 
as  out  of  a  male — out  of  a  child  as  out  of  an  adult,  out  of 
a  widow  as  out  of  an  orphan.  Much  of  the  profit  of  corpo¬ 
rations  is  derived  from  the  labor  of  underpaid  women  and 
children. 

Sex  does  not  protect  women  stockholders  when  a  cor¬ 
poration  decides  to  pay  no  dividends  to  its  stockholders, 
sometimes  for  years  on  a  stretch,  as  in  the  case  of  many 
railroads  and  public  utilities;  or  when  dividends  are  re¬ 
duced,  as  in  the  case  of  the  Pennsylvania  Railroad,  from 
six  to  four  percent.  And  in  those  cases  where  it  can  be 
shown  that  the  insiders  defrauded  the  stockholders,  froze 
them  out,  robbed  them  of  their  just  due  by  looting  treas¬ 
uries,  grafting  and  mismanagement  and  wrecking  of  prop¬ 
erties  into  which  women  had  been  persuaded  to  invest, 


The  New  Capitalism 


44 

one  looks  in  vain  for  any  special  consideration  extended  to 
“ widows  and  orphans.” 

The  Smoke  Screen  Purpose 

The  principal  value  of  the  small  investor  is  that  he  or 
she  can  be  used  as  a  smoke  screen,  under  cover  of  which 
it  is  possible  to  do  many  things  which  otherwise  could  not 
be  done.  “If  Big  Business  is  in  a  conspiracy,”  said  Mr. 
Schwab,  “quite  a  number  of  people  seem  involved  in  it.” 
It  is  this  smoke  screen  purpose  that  explains  the  small 
investor ’s  popularity. 

Employees  as  Stockholders 

Running  parallel  with  the  Capitalistic  plan  to  increase 
the  number  of  smoke  screen  investors  is  the  Capitalistic 
campaign  (begun  ten  or  twelve  years  ago)  to  inveigle  the 
employees  of  corporations — wage  earners  and  salaried  men 
and  women — into  becoming  stockholders.  During  the  past 
few  years  a  considerable  number  of  the  leading  corporations 
have  ingeniously  put  forth  Employees’  Stock  Subscription 
plans.  For  example :  On  Thanksgiving  Day,  1920,  the 
daily  papers  announced  that  the  directors  of  the  Standard 
Oil  Company  of  New  Jersey  had  voted  to  submit  to  its 
stockholders  “a  plan  by  which  about  37,000  employees  in 
America  would  be  assisted  in  acquiring  stock.  Increase  in 
the  common  stocks  by  $10,000,000,  accompanied  by  the 
reductions  of  the  present  $100  par  value  to  $25,  is  included 
in  the  proposition.  Employees  who  have  been  active  in  the 
Company’s  service  for  a  year  or  more  will  be  eligible  to 
acquire  stock.” 

According  to  Mr.  Gary  1  on  April  30,  1919,  more  than 
40,000  employees  were  stockholders  in  the  United  States 
Steel  Corporation.  “Their  aggregate  holdings  amounted 
to  more  than  186,000  shares  of  stock  at  a  par  value  of 
$18,600,000. 

“In  January,  1920,  employees  of  the  United  States  Steel 
Corporation  and  the  subsidiary  companies,  were  again 


i  The  Magazine  of  Wall  Street  (November  13,  1920). 


The  Different  Kinds  of  Investors  45 


offered  the  privilege  of  subscribing  for  shares  of  the  com¬ 
mon  stock  of  the  corporation.  .  .  .  Subscriptions  have 

been  received  from  a  total  of  66,311  employees,  for  an 
aggregate  number  of  167,263  shares.  This  is  the  largest 
subscription  received  under  any  offer.  ’  ’ 2 

This  endeavor  on  the  part  of  ‘  ‘  Big  Business  ’  ’  to  grapple 
to  itself  its  employees  “with  hoops  of  steel,”  has  several 
notions  behind  it.  Sir  Charles  Wright  Macara,  reputed  to 
be  “one  of  the  foremost  business  men  in  England,”  re¬ 
cently  said: 

“If  the  workmen  feel  that  they  must  earn  more  to  face 
the  cost  of  living,  they  should  accept  a  monetary  interest 
in  the  industries  which  give  them  employment.  .  .  . 

This  principle  of  individual  co-partnership  would  help  to 
solve  many  of  the  problems  pending  between  Capital  and 
Labor.  *  ’ 3 

But  we  need  not  go  to  England  for  proof  that  there  is 
method  in  the  madness  that  is  trying  to  make  labor  parti- 
ceps  criminis  in  the  sundry  Capitalistic  schemes.  Here,  for 
example,  are  a  few  excerpts  from  a  speech  made  by  Dr. 
Charles  A.  Eaton,  before  the  Chicago  Association  of  Com¬ 
merce  : 

“Where  are  we  going  to  find  new  resources  and  capital 
for  working  the  industries  of  this  country?  We  have  got 
to  find  it.  I  tell  you,  gentlemen,  that  it  is  right  here  in 
the  surplus,  the  savings  of  the  working  people  of  this 
nation.  .  .  . 

“I  believe  that  we  could  turn  into  the  industries  of  this 
country  about  two  billion  dollars  a  year  from  that  one 
source  alone,  and  every  investor  so  guaranteed  and  so 
looked  after  and  cared  for  and  educated,  would  become  a 
tower  of  strength  against  all  the  revolutionary  doctrines 


1  At  the  end  of  1921  the  United  States  Steel  Corporation  reported 
107,439  stockholders,  over  one-half  of  whom  it  would  seem,  are  em¬ 
ployees.  But  their  aggregate  holdings  353,263  shares,  computed  at  par, 
represent  a  value  of  $35,326,300,  which  is  less  than  three  percent  of  the 
authorized  capital  stock  of  the  United  States  Steel  Corporation. 

8  “In  Search  of  a  Peaceful  World,”  by  Sir.  Charles  Wright  Macara 
quoted  in  the  Chicago  Daily  News ,  December  31,  1920. 


46 


The  New  Capitalism 


of  radicalism  and  stupidities  that  are  sweeping  over  the 
world  today.  There  is  a  great  field  there.  ’  ’ 4 

This  is  what  I  call  killing  a  whole  flock  of  birds  with 
a  stick  of  dynamite.  Dr.  Eaton  is  right — “There  is  a  great 
field  there.”  If  “Big  Business”  can  succeed  in  tying,  and 
keeping  tied  to  its  chariot,  a  considerable  number  of  wage 
earners,  its  forward  course  henceforth  will  be  a  veritable 
triumphal  procession. 

The  Nexus  of  the  Matter 

But  I  will  not  allow  myself  in  this  chapter  to  be  carried 
away  by  the  temptation  to  inquire  into  the  concealed  mo¬ 
tives  inspiring  and  actuating  “Big  Business”  in  any  of  its 
designs.  I  set  out  to  approximate  the  constituency  and 
complexion  of  the  investor  group,  and  shall  therefore  re¬ 
sume  the  pursuit  of  my  immediate  purpose. 

I  have  estimated  5  the  total  number  of  investors  as  four 
million  persons,  one  million  of  whom  I  have  set  aside  as 
constituting  a  group  whose  investments  are  in  things  other 
than  the  securities  of  corporations.  This  leaves  three  mil¬ 
lion  in  the  securities  investor  group,  which  I  have  divided 
as  follows: 

Non-speculative,  or  Iona  fide  investors,  1,500,000. 

Speculative,  or  mala  fide  investors,  1,500,000. 

But  even  though  we  were  to  say  that  four  million  inves¬ 
tors  collectively  held  all  the  securities  issued  by  all  the 
corporations  in  the  United  States,  the  one  thing  I  desire 
above  all  others  to  emphasize,  is  that  the  virtual  ownership 
and  control  of  the  important  corporate  properties  is  vested 
in  the  hands  of  about  one  percent  of  the  investors,  or  about 
40,000  persons.  Nay!  I’ll  go  a  step  farther  and  say  that 
actual  ownership  and  control  is  concentrated  in  the  hands 
of  one-tenth  of  one  percent — -or  approximately  4000  indi¬ 
viduals  or  families  of  the  so-called  investors.-  Indeed  it 
would  not  be  difficult  to  show  that  dominant  ownership  and 

4  Quoted  from  Chicago  Commerce ,  March  12,  1921. 

*  I  shall  be  glad  to  correct  my  tentative  estimates  the  moment 
authentic  or  official  statistics,  fully  covering  the  points  involved,  are 
forthcoming. 


The  Different  Kinds  of  Investors  47 


control  resides  in  less  than  one-hundredth  of  one  percent 
of  the  total  number  of  investors — in  400  families  or  estates, 
rather  than  in  4000  individuals.  I  could  easily  fill  a  dozen 
pages  with  relevant  statistics,  all  tending  to  support  me 
in  my  contention;  but  I  do  not  consider  this  necessary  at 
the  present  moment,  particularly  since  succeeding  chapters 
will  go  far  toward  establishing  the  fact. 

These  four  hundred,  or  four  thousand,  or  forty  thousand 
(more  or  less,  as  you  choose)  circle  within  circle,  constitute 
the  inner  Capitalistic  cabal — are  the  center  of  the  Capi¬ 
talistic  System  as  we  know  it  today ;  the  chief  actors  in,  and 
beneficiaries  of,  what  it  pleases  some  to  call  “the  established 
order” — which  is  nothing  else  than  Capitalistic  Mam- 
monism. 


CHAPTER  VI 


The  Capitalistic  Entrepreneurs 

IME  was  in  the  history  of  our  industrial  develop¬ 


ment,  when  we  had  a  race  of  men  who  were  pioneers 


in  business  enterprises;  men  who,  with  small  capital 
at  their  command,  built  up  the  leading  industries  of  the 
nation  successfully  and  to  surprising  proportions.  Consid¬ 
ering  them  as  a  group,  we  can  say  that  they  were  men  of 
native  ability,  of  shrewd  intelligence,  of  sturdy  character, 
of  robust  integrity.  Many  of  them,  by  hard  work,  laid  the 
foundation  of  modest  fortunes  upon  which  they  built  slowly 
and  conservatively.  True,  there  were  few  millionaires 
among  them ;  most  of  them  hardly  dared  to  dream  of  ever 
becoming  more  than  moderately  rich. 


Captains  of  Industry 


These  men  who  founded,  or  were  at  the  head  of,  the  lead¬ 
ing  industries  and  enterprises  were  called  Captains  of 
Industry,  as  indeed  they  were.  The  railroad  president  was 
actually  a  railroad  man — builder  or  principal  owner — tak¬ 
ing  a  personal  interest,  and  feeling  the  pride  of  manage¬ 
ment  or  ownership,  and  the  glory  of  achievement,  in  the 
properties  over  whose  destinies  he  presided.  The  president 
of  a  steel  mill  was  an  iron-master ;  and  so  on,  covering  the 
entire  list  of  industries. 


Captains  of  Finance 


In  those  times  banking  was  a  distinct  business;  and  the 
banker  a  business  man  whose  business  it  was  to  mass  to¬ 
gether  small  amounts  of  idle  money  and  wealth  and  bring 
them  into  use.  Through  his  agency  wealth,  which  would 


48 


The  Capitalistic  Entrepreneurs 


49 


otherwise  be  unproductive,  became  productive.  The  banker 
was,  therefore,  a  Captain  of  Finance,  the  intermediary 
between  those  who  possessed  capital  and  those  who  em¬ 
ployed  it.  As  such  he  was  a  part  of  the  business  machine 
— the  main  spring  of  the  Clock  of  Commerce — the  pen¬ 
dulum,  if  you  will. 

“The  Old  Order  Chang eth” 

But  towards  the  end  of  the  nineteenth  century  a  tremen¬ 
dous  change  took  place  in  the  business  of  banking.  The 
banker,  whose  profits  and  success  as  a  business  man  de¬ 
pended  as  much  upon  the  continued  good  will  and  patron¬ 
age  of  men  in  other  businesses  as  upon  his  reputation  for 
honesty  and  square  dealing;  the  banker  whose  sterling 
character,  unquestioned  integrity  and  sound  business  judg¬ 
ment  were  his  chief  assets,  ceased  to  exist,  and  in  his  place 
appeared  the  Investment  banker,  as  different  from  the  old 
style  banker  as  night  from  day.  With  his  coming  the  old 
business  and  banking  methods  were  contemptuously  kicked 
aside.  New  business  and  banking  principles  were  substi¬ 
tuted  for  the  old ;  new  policies  were  adopted ;  new  methods 
introduced,  new  practices  instituted.  Thus  the  ‘  ‘  established 
order”  came  to  an  abrupt  end,  and  a  new  order  was  estab¬ 
lished  almost  overnighty  we  might  say,  and  by  a  few  men . 

The  Advent  of  the  “Investment  Banker ” 

The  old  style  banker  dealt  in  actual  capital,  actual 
wealth,  actual  securities,  and  loaned  the  capital  submitted 
to  his  care  against  actual  values  and  actual  assets.  The  new 
Investment  banker  took  all  these  as  a  basis,  and  added 
thereto  vast  amounts  of  fictitious  capital  and  fictitious 
wealth,  which  he  himself  created  by  a  stroke  of  the  pen; 
arbitrarily  inflated  values,  vastly  in,  excess  of  existing 
assets ;  against  which  fictitious  valuation  he  issued  ‘  ‘  securi¬ 
ties  ’  ’ — stocks  and  bonds  which  at  their  inflated  value  could 
be  used  as  credit  instruments,  and  upon  which  he  borrowed 
or  loaned,  or,  more  properly  speaking,  took  or  extended 


50 


The  New  Capitalism 


credit  many  times  greater  than  was  justified  by  the  actual 
value  of  the  physical  assets.1 

Conscious  of  the  tremendous  power  vested  in  their  abso¬ 
lute  monopoly  of  the  nation’s  finances — their  unchallenged 
control  of  the  nation’s  money  and  credit;  quick  to  see  the 
possibilities  of  a  still  greater  expansion  of  that  power 
through  the  medium  of  inflated  securities  flotations — and 
by  no  means  blind  to  the  immense  profits  that  could  be 
made  to  accrue  to  them — a  small  group  of  Investment 
bankers,  under  the  leadership  of  J.  Pierpont  Morgan,  con¬ 
stituted  theniselves  into  syndicates  for  the  clear  cut  pur¬ 
pose  bfJthkiflg "fiver  the  principal  industries,  national  re¬ 
sources,  raw  materials — everything,  in  fact,  out  of  which  a 
profit  could  be  made — with  what  success  is  now  generally 

m 

-gbifj;  gaoiiiaird  bniiog 


The  Ascendancy  of  the  Captains  of  Finance 

bio  9 fit  /noii  Jneisnib  as 

Thus  if  came  to  pass  that  Capitalists,  or  bankers — more 
accurately  speaking,  Investment  bankers — became  Entre¬ 
preneurs ;  the  new  Captains  of  Finance  arrogated  to  them¬ 
selves  also  the  role  of  Captains  of  Industry.  Capital  be- 
came  the  employer.  And  yet,  only  a  few  years  before,  the 
possibility  of  such  a  thing  was  scouted  by  eminent  econom¬ 
ists.  For  example,  Francis  A.  Walker,  “a  distinguished 
American  economist”  writing  in  1875,  vehemently  main¬ 
tained  tthat  the  capitalist  and  the  employer  were  entirely 
distinct;  indeed  he  insisted  on  calling  the  employer  a 

middle  man,  placing  him  between  the  capitalist  and  the 

fBjiqso  9  dt  bsxLsol  him  ,89fthuD 


<AIt  is  no  longer  true, v  said  he,  “that  a  man  becomes  an 
employer  because  he  is  a  capitalist.  Men  command  capital 
because  they  have  the  qualifications  to  profitably  employ 
labor.  To  these,  Captains  of  Industry,  despots  of  industry, 

if  one  pleases  to  call  them  so,  capital  and  labor  alike  resort 

_ hoirasd  ul  uoitisiilav  guoilltoft  ibiib  ‘ 


XI  need  hardly  put  stress  on  what  is  universally  known,  that  the 
flotation,  the  underwriting  and  the  marketing  of  stock  and  bond  issues 
based  on  inflated  valuations,  is  now  a  highly  remunerative  branch  of 
the  Investment  banker’s  business,  and  a  constant  source  of  considerable 
revenue  and  profit  to  those  engaged  therein. 


The  Capitalistic  Entrepreneurs 


51 


for  the  opportunity  to  perform  their  several  functions.  I 
do  not  mean  that  the  employer  is  not  in  any  case,  or  to 
some  extent,  a  capitalist;  but  that  he  is  not  an  employer 
simply  because  he  is  a  capitalist,  or  to  the  extent  only  to 
which  he  is  a  capitalist.  .  .  . 

“I  hold  that  no  theory  of  the  distribution  of  wealth,  in 
modern  industry,  can  be  complete  which  fails  to  make 
account  of  the  employing  class,  as  distinguished  in  idea, 
and  largely  also  in  its  personnel ,  from  the  Capitalistic 
class. ’  ’ 2 

A  New  Economic  Term 

The  word  Entrepreneur  is  a  comparatively  new  word  in 
our  economic  literature,  and  economic  writers  do  not  seem 
agreed  as  to  its  precise  meaning  and  application.  Accord¬ 
ing  to  the  dictionary  an  Entrepreneur  is  “one  who  starts 
and  conducts  extensive  industrial  enterprises. 7 ’  But  there 
are  some  economic  writers  who  prefer  to  use  the  word  in 
its  narrower  meaning.  For  example,  Professor  Willford 
Isbell  King,  as  late  as  1910,  considered  “farmers,  small 
merchants  or  shopkeepers,  hotel  proprietors  and  the  like” 
as  Entrepreneurs. 3 * 

E.  Levasseur,  in  his  “Elements  of  Political  Economy” 
(p.  74)  takes  a  slightly  different  view.  He  says:  “Who¬ 
ever  undertakes,  on  his  own  account,  to  fashion  a  product 
or  execute  a  bit  of  work,  is  an  entrepreneur.  The  entrepre¬ 
neur  who  labors  alone  without  a  body  of  men  under  him, 
or  with  the  sole  assistance  of  his  family,  or  possibly  one  or 
two  assistants,  is  an  artisan.  The  entrepreneur  who  makes 
use  of  workmen  is  an  employer ;  he  exercises  authority  over 
his  subordinates  whom  he  pays,  and  the  product  of  whose 
labor  belongs  to  him  according  to  agreement.  There  are 
employers  of  widely  different  means,  some  having  but  a 
few  workmen,  differing  but  little  from  artisans,  others 
having  hundreds  or  even  thousands  of  workmen  and  em- 

2  “The  Wages  Question,”  by  Francis  A.  Walker,  page  246. 

3  According  to  Professor  King  there  were  9,350,000  entrepreneurs  in 

the  United  States  in  1910. 


52 


The  New  Capitalism 


ployees,  and  designated  as  entrepreneurs,  captains  of  in¬ 
dustry,  manufacturers,  managers,  or  merchants.  .  .  . 

Several  entrepreneurs  may,  without  subordinating  them¬ 
selves  to  one  another,  unite  their  efforts  and  their  capital 
in  order  to  co-operate  in  the  same  industrial  enterprise,  and 
divide  the  profits;  this  is  what  is  called  association.” 

Professor  Richard  T.  Ely,4  says :  ‘  ‘  The  one  who  manages 
a  business  for  himself  was  formerly  called  an  undertaker 
or  an  adventurer,  but  the  first  word  has  been  appropriated 
by  one  small  class  of  business  men,  and  the  latter  has 
acquired  a  new  meaning,  carrying  with  it  the  implication 
of  rashness  and  even  dishonesty.  We  have,  consequently, 
been  obliged  to  resort  to  the  French  language  for  a  word 
to  designate  the  person  who  organizes  and  directs  the  pro¬ 
ductive  factors,  and  we  call  such  a  one  an  entrepreneur. 

1 1  The  function  of  the  entrepreneur  has  become  one  of  the 
most  important  in  modern  economic  society.  He  has  been 
well  called  a  Captain  of  Industry,  for  he  commands  the 
industrial  forces,  and  upon  him,  more  than  upon  anyone 
else,  rests  the  responsibility  for  success  or  failure. ?  ’  .  .  . 

The  Period  of  Gestation 

At  the  time  Professor  Ely  wrote  the  above  (A.  D.  1893), 
Capitalistic  Association,  as  we  know  it  today,  had  not  yet 
been  developed.  There  were  Capitalists  and  there  were 
Captains  of  Industry;  but  no  Capitalistic  Entrepreneurs, 
and  no  Capitalistic  Entrepreneur  System. 

“We  find  the  assumption, ’ ’  wrote  Professor  Walker,  in 
1875, 5  “that  the  capitalist  is  the  employer,  the  employer  the 
capitalist,  monstrously  unreal.  ...  Of  capitalists  under 
our  modern  organization  of  industry,  but  a  small  minority 
employ  labor;  of  employers,  fewT  but  use  capital  far  in 
excess  of  what  they  own.” 

With  the  organization  of  the  United  States  Steel  Corpo¬ 
ration  (in  1901),  the  “assumption”  at  which  Professor 
Walker  expressed  horror,  became  monstrously  real.  All 

4  “Outlines  of  Economics,”  p.  113.  Published  1893. 

5  Even  in  his  later  economic  writings,  Professor  Walker  adhered  to 
his  original  opinions  on  this  point. 


The  Capitalistic  Entrepreneurs 


53 


the  things  that  Professor  Walker  said  could  not  happen, 
have  come  to  pass.  Our  leading  industries  are  no  longer 
owned  or  controlled,  or  even  run  by  the  men  who  founded 
them,  nor  even  by  their  descendants;  in  many  cases  not 
even  the  names  of  the  founders  remaining.  Today  “the 
Capitalist  is  the  employer.”  A  single  Capitalistic  corpora¬ 
tion  (United  States  Steel),  employs  250,000  workmen — an 
army  of  men  greater  than  the  standing  army  of  the  United 
States.  But  worst  of  all,  a  “small  minority”  gained  con¬ 
trol  of  practically  all  industries  through  their  uncurbed 
power  to  “use  capital  far  in  execess  of  what  they  own.” 
Absolute  control  and  definitive  ownership  of  them  has 
passed  into  the  hands  of  a  small  group  of  Capitalistic 
Entrepreneurs.  In  a  remarkably  short  time  these  Captains 
of  Finance  assumed  the  captaincy  of  all  the  industries,  in 
fact  of  every  remunerative  enterprise. 

The  Capitalistic  Entrepreneurs ,  alias  the 

“Big  Interests” 

Thus  the  Capitalistic  Entrepreneurs,  sometimes  denomi¬ 
nated  as  the  ‘  *  Big  Interests  ’  ’  were  brought  into  existence ; 
by  such  procedure  the  Capitalistic  Entrepreneur  System — 
sometimes  spoken  of  as  “Big  Business” — was  established. 
“An  entrepreneur,”  says  the  dictionary,  “is  one  who 
starts  and  conducts  extensive  industrial  enterprises.”  As 
a  matter  of  fact  the  Capitalistic  Entrepreneurs,  with  few 
exceptions,  did  not  start  the  “extensive  industrial  enter¬ 
prises,”  which  they  so  supremely  control  today.6  Most  of 
them  had  never  been  in  the  plants  whose  ownership  and 
control  they  took  over.  Mr.  Morgan,  it  goes  without  saying, 
never  worked  in  a  mill,  mine  or  factory.  Mr.  Gary  has 
never  in  all  his  life  made  a  pound  of  steel,  as  he  himself 
naively  admitted  at  one  of  the  famous  and  now  historic 
dinners,  and  at  which  he  presided,  given  in  the  first  decade 
of  the  twentieth  century,  and  during  the  first  decade  of 
the  United  States  Steel  Corporation’s  existence. 

0  This  is  shown  more  clearly  in  the  chapter,  “Labor,  Capital  and 
Brains.” 


54 


The  New  Capitalism 


“Is  it  any  wonder/’  said  Judge  Gary,  “that  such  as  I, 
coming  a  few  years  ago  from  another  profession,  having 
spent  his  time  in  other  lines  of  activity,  coming  into  this 
business  without  knowledge  of  the  business  or  acquaintance 
with  those  connected  with  it,  groping  along  in  more  or  less 
uncertain  paths,  but  eventually  reaching  the  position  which 
we  have  reached  in  our  travels,  so  that  we  can  have  and 
do  have  absolute  confidence  in  one  another,  willing  to  lay 
our  business  down  upon  the  table  for  the  inspection  of  our 
neighbor — is  it  any  wonder  that  I  should  be  elated,  that  I 
should  be  happy,  that  I  should  be  proud  of  the  fact  that  I 
am  associated  with  such  as  you;  that  in  representing  the 
interests  of  a  large  corporation  I  can  do  business  with  so 
many  men  of  prominence,  education,  high  standing  and 
repute  in  the  community,  feeling  all  the  time  that  I  and 
the  interests  I  represent  are  absolutely  safe  in  your  hands.  ’ 9 
(Hearings  p.  1777.) 

“The  Small  Minority” 

The  Capitalistic  Entrepreneurs  did  not  confine  themselves 
to  “industrial  enterprises.”  Everything  out  of  which  a 
profit  could  be  made  became  an  integral  part  of  the  Capi¬ 
talistic  System,  the  nucleus  of  which,  as  I  have  already 
shown,  is  composed  of  a  few  thousand  persons,  more  prop¬ 
erly  speaking,  a  few  hundred  individuals  representing 
families  and  estates.  These  few  hundred,  or  thousand,  as 
you  choose,  practically  own  and  control : 

1 :  The  Important  Banks  of  the  United  States. 

2 :  The  Transportation  Systems. 

3.  The  Public  Utilities. 

4 :  The  Insurance  Companies.  4 

5  :  The  Basic  Materials,  such  as  oil,  lumber,  coal,  iron,  etc. 

6 :  The  Principal  Industries. 

There  may  be  some  who  will  quarrel  about  the  exact 
number  constituting  this  small  group ;  but  they  cannot  deny 
the  fact;  nor  is  there  any  doubt  about  the  ubiquity  of  the 
persons  composing  it.  Let  us  take  a  concrete  example,  that 
of  the  Standard  Oil  Company,  for  which  we  have  authentic 


The  Capitalistic  Entrepreneurs 


55 


data.  Henry  H.  Klein,  Deputy  Controller  of  Accounts  in 
New  York  City,  in  his  book  “ Standard  Oil  or  the  People,’ ’ 
gives  a  list  of  the  principal  stockholders  in  the  Standard 
Oil  Company  before  the  Government  1  ‘  dissolution  ”  suit 
was  brought,  August  19,  1907.  According  to  Mr.  Klein, 
nineteen  stockholders  held  53  percent  (or  523,985  shares) 
of  the  Standard  Oil  stock. 

Mr.  Klein  also  names  forty-three  other  stockholders  in 
Standard  Oil  whose  holdings  aggregate  94,141  shares. 
According  to  Mr.  Klein,  therefore,  sixty-two  persons  owned 
an  aggregate  of  618,126  of  the  983,383  outstanding  shares 
of  Standard  Oil  stock. 

Mr.  Klein  also  speaks  of  the  monopolies  controlled  by  the 
Standard  Oil  Company :  ‘  ‘  Petroleum,  oil,  gas,  turpentine, 
natural  gas,  gasoline,  vaseline,  carbon  paper,  lubricating 
oil,  paraffin,  crude  oil,  benzine,  naptha,  and  200  other 
by-products  of  oil.” 

In  addition  to  which  he  enumerates  “  other  monopolies 
in  which  Standard  Oil  money  is  largely  invested:  Rail¬ 
roads,  banks,  insurance,  coal,  steel,  iron,  copper,  lead,  zinc, 
ships,  lumber,  waterpower,  sugar,  tobacco,  electricity,  coal 
products,  agricultural  implements,  alcohol,  rubber,  leather, 
print  paper,  public  lines  corporations,  glue,  mica,  auto¬ 
mobiles,  rubber  tires,  express  companies,  gun  powder,  am¬ 
munition,  candy,  glucose,  eggs,  milk,  steam  pumps,  type¬ 
writers,  telephone,  telegraph,  matches,  real  estate,  grain,  tin, 
cement,  ice,  chewing  gum,  shoe  machinery,  ammonia,  sul¬ 
phuric  acid,  washing  powder,  soups,  white  lead,  oilcloth, 
linseed  oil,  cotton  seed,  reaping  machinery,  benzol,  lard, 
coke,  paving  blocks,  ploughs,  salt,  bread,  threshing  ma¬ 
chines,  creosote,  putty,  coal  tar.”7 

The  Financial  Oligarchy 

That  the  control  of  all  the  industries,  transportation 
systems,  public  utilities,  etc.,  is  through  the  instrumentality 
of  a  few  powerful  banks  is  so  generally  known  that  I  do 
not  consider  it  necessary  to  go  into  detail.  It  is  impossible 


7  “Standard  Oil  or  the  People,”  by  Henry  H.  Klein,  pp.  128,  129. 


56 


The  New  Capitalism 


to  deny  that  there  is  a  Money  Trust — a  financial  oligarchy, 
composed  of  a  small  group  of  men  who  control  the  finances 
and  financial  resources  of  the  nation.  The  evidence  is  over¬ 
whelming;  official  Government  investigations  have  indubi¬ 
tably  established  the  fact.  Special  Commissions,  and  Con¬ 
gressional  Committees  have  published  their  reports.  To 
deny  the  existence  of  a  Money  Trust  and  a  financial 
oligarchy  at  this  date  is  an  act  of  stultification,  and  he  who 
would  dare  attempt  a  denial  in  the  face  of  all  the  accessible 
data  and  testimony,  is  either  a  fool  or  a  knave  or  both, 
and  an  object  of  every  decent  man’s  contempt. 

I  shall,  therefore,  waste  no  time  in  proving  what  has 
been  repeatedly  and  conclusively  established  beyond  every 
possible  doubt,  and  is  generally  known  to  all  the  people, 
viz.,  that  by  virtue  of  this  absolute  monopoly  of  money  and 
complete  control  of  the  nation’s  credit,  this  same  small 
group  of  men  has  been  enabled  to  organize  powerful  Trusts, 
thus  gaining  a  monopolistic  control  of  practically  all  the 
nation’s  resources  and  productive  properties. 

Wall  Street — the  Citadel 

Neither  shall  I  waste  much  space  in  emphasizing  that 
the  absolute  control  and  dictatorship  of  the  nation ’s  money, 
centers  in  Wall  Street.  Senator  La  Follette,  in  a  speech 
in  the  Senate  of  the  United  States,  on  the  Winslow-Towns- 
end  Bill,8  said : 

“I  have  studied  transportation  for  thirty  years  of  my 
life,  and  I  want  to  tell  you  that  there  was  a  time  when  real 
railroad  men  were  at  the  head  of  the  railroads  of  this  coun¬ 
try.  The  financiers  of  Wall  Street  are  running  the  rail¬ 
roads  today.  Beginning  about  1900  a  change  came,  and 
the  railroad  management  of  the  country  passed  out  of  the 
hands  of  the  men  who  had  come  up  from  the  ranks,  who 
were  capable  of  running  the  railroads,  and  believed  in 
balancing  service  against  transportation  charges.  The  man¬ 
agement  of  the  railroads  passed  into  the  hands  of  the 

8  Delivered  February  21  and  22,  and  published  in  the  Congressional 
Record ,  March  14,  1921. 


The  Capitalistic  Entrepreneurs 


57 


representatives  of  Wall  Street,  and  from  that  hour  on  the 
railroads  of  the  United  States  have  not  been  run  by  men 
capable  of  managing  the  transportation  of  the  country. 
They  have  been  run,  sir,  by  the  representatives  of  the  great 
financial  houses,  by  the  promoters,  by  the  banks. 

“I  should  like  to  have  time  to  hang  on  this  wall  a  map 
I  have  in  my  committee  room  above  here,  showing  what  has 
happened  in  regard  to  railroad  management  in  the  last 
twenty  years  in  the  United  States.  It  has  passed  into  the 
hands  of  a  few  groups  of  financiers,  the  Morgan  group  at 
the  head  of  the  lot.  ” 

Senator  La  Follette  declared  that  of  the  600,000  stock¬ 
holders  of  the  first  class  roads  “which  roads  represent  97 
percent  of  the  traffic  of  the  country,  ”  less  than  1.3  percent, 
or  8,301  control  the  stock.  “But”  he  added,  “we  can  by  no 
means  assume  upon  these  facts  that  8,301  individuals  actu¬ 
ally  share  in  the  control  of  the  transportation  system.  The 
real  power  which  today  controls  the  railroads  of  the  United 
States  is  the  group  of  a  dozen  New  York  financial  institu¬ 
tions  which  make  up  the  New  York  banking  combine. 

“In  this  group  are  the  following  institutions:  National 
Bank,  The  Equitable  Trust  Co.,  The  American  Surety  Co., 
The  National  Security  Co.,  The  National  Life  Insurance 
Co.,  The  Equitable  Life  Assurance  Society  of  the  United 
States,  The  Chase  National  Bank,  The  National  City  Bank, 
The  Mechanics  and  Metals  National  Banks,  The  New  York 
Trust  Co. 

“Members  of  the  boards  of  directors  of  these  banks  con¬ 
trol  approximately  270  directorships  of  93  class  1  railroads. 
The  boards  of  the  principal  railroad  systems  do  not  often 
number  more  than  15  directors.  The  New  York  banks  listed 
above,  average  from  four  to  five  members  on  the  boards  of 
each  of  the  principal  systems. 

‘  ‘  Taking  the  banks  individually,  the  Guaranty  Trust  Co. 
has  50  railroad  directorships ;  the  National  City  Bank,  48 ; 
and  the  Equitable  Trust  Co.,  34.  These  three  banks  have  a 


58 


The  New  Capitalism 


total  of  132  railroad  directorships.  The  Guaranty  Trust 
Co.  has  a  director  on  each  of  the  principal  systems.”9 

Interlocking  Directorates 

The  ingenious  device  through  which  a  small  group  of 
men  controls  practically  all  the  big  banks,  insurance  com¬ 
panies,  transportation  systems,  public  utilities,  mines,  and 
other  natural  resources,  raw  materials  and  industries,  is 
known  as  “interlocking  directorates,”10  that  is  to  say,  the 
principals  of  one  corporation  function  also  as  officers,  man¬ 
agers  or  directors  in  other  corporations.  This  was  brought 
out  conspicuously  during  the  investigation  of  the  United 
States  Steel  Corporation  in  1912.  Exhibit  E  of  the  official 
report,  gives  an  itemized  list  showing  the  “industrial  cor¬ 
porations,  railroads,  traction,  telegraph,  express  and  steam¬ 
ship  companies;  the  banks,  insurance  and  trust  companies 
of  the  United  States,”  of  which  the  President  and  other 
directors  of  the  Steel  Corporation  are  officers  or  directors. 

But  instead  of  filling  many  wearisome  pages  with  a 
transcript  from  the  official  report,  I  prefer  to  illustrate  the 
point  by  a  brief  extract  from  an  article  that  recently 
appeared  in  a  financial  publication,  The  Annalist,  (Sep¬ 
tember  19,  1921)  and  the  author  of  which,  John  Oakwood, 
(a  frequent  contributor  to  The  Annalist)  cannot  be  accused 
of  bias  or  sinister  intent.  In  fact  it  was  by  way  of  lauda- 


9  Senator  LaFollette  also  showed  at  considerable  length,  that  the 
same  group  of  banks  and  bankers  that  controls  the  railroads  is  also 
“heavily  interested  in  the  leading  concerns  which  purchase  railway 
supplies  and  equipment.”  Senator  LaFollette  offered  an  Appendix  to 
his  speech,  which  contains  exhibits  and  charts  all  based  upon  the  latest 
data  available.  The  Appendix  alone  covers  45  pages — pp.  4741  to  4786 
of  the  Congressional  Record,  March  14,  1921,  Vol.  60,  No.  8. 

10  Those  who  have  a  sense  of  humor  will  enjoy  the  following :  “On 
December  5,  1921,  a  financial  paper  announced  that  Otto  H.  Kahn  regret¬ 
fully  resigned  from  the  directorship  of  the  Union  Pacific  Railroad 
“because  of  provisions  of  the  Clayton  act  which  so  rigidly  forbids  inter¬ 
locking  directorships.”  (The  Clayton  act  may  indeed  “rigidly  forbid 
interlocking  directorships,”  but  we  all  recall  that  a  few  years  ago  the 
United  States  Supreme  Court  ruthlessly  “dissolved”  the  Standard  Oil 
Company.)  On  December  8,  1921,  I  read  that  “William  Rockefeller 
today  applied  to  the  Interstate  Commerce  Commission  for  permission 
to  hold  directorships  in  eighteen  railroad  companies.”  On  December  81, 
1921,  the  following  dispatch  from  Washington:  “All  persons  holding 
two  or  more  places  as  officers  and  directors  of  interstate  railroad  cor¬ 
porations  were  given  legal  permission  by  the  Interstate  Commerce  Com¬ 
mission  today  to  hold  their  various  positions  indefinitely.” 


The  Capitalistic  Entrepreneurs  59 

tion,  and  as  a  tribute  to  the  genius  of  J.  Pierpont  Morgan, 
that  Mr.  Oakwood  delivered  himself  of  the  following: 

“When  J.  Pierpont  Morgan  was  in  power  he  ruled  per¬ 
haps  the  greatest  financial  empire  the  world  has  ever  seen. 
He  was  the  senior  autocrat  of  an  inner  group  of  banks  and 
bankers  who  directly  and  indirectly  exercised  through  par¬ 
tial  or  absolute  control  in  many  financial  institutions 
through  their  stockholdings,  through  voting  trusts,  inter¬ 
locking  directorates  and  many  other  devices,  a  vast  domin¬ 
ion  over  business,  industry  and  finance. 

“The  members  of  this  inner  group  commanded  by  Mor¬ 
gan  held  118  directorships  in  34  banks  and  trust  companies, 
whose  total  resources  amounted  to  $2,678,000,000. 

“They  held  30  directorships  in  10  insurance  companies 
having  total  assets  of  $2,293,000,000. 

“They  held  105  directorships  in  32  transportation  sys¬ 
tems  with  a  total  capitalization  of  $11,784,000,000,  and  a 
total  mileage  of  150,000. 

1 1  They  held  63  directorships  in  24  producing  and  trading 
corporations  with  a  total  capitalization  of  $3,339,000,000. 

“They  held  25  directorships  in  12  public  utility  cor¬ 
porations  having  a  total  capitalization  of  $2,150,000,000. 
In  all,  in  other  words,  they  held  at  least  341  directorships 
in  112  corporations  having  aggregate  resources  or  capitali¬ 
zation  of  $22,245,000,000,  and  how  much  more  the  record 
does  not  show. 

“In  addition  this  inner  group,  consisting  of  three  great 
dominant  banking  houses,  was  intimately  allied  with  three 
great  investment  houses,  and  in  the  course  of  eight  years 
these  six  and  their  associates  bought  or  underwrote  nearly 
300'security  issues  totaling  over  $3,600,000,000,  their  opera¬ 
tions  comprising  virtually  every  financial  operation  of 
major  importance  conducted  in  the  United  States  during 
the  period.  These  operations  were  put  through  with  the 
entire  absence  of  competition.  When  Government  investi¬ 
gation  brought  out  and  authenticated  this  much  of  the 


60 


The  New  Capitalism 


story,  it  irked  the  public  mind  as  it  had  seldom  been  irked 
before,  and  Morgan  was  assailed  as  a  money  tyrant.  ’  ’  Etc.11 

The  Autocratic  Czars  of  Finance 

Those  who  are  especially  interested  in  this  subject  are 
referred  to  the  report  of  the  Pujo  Committee  (February  28, 
1913),  which  was  appointed  to  investigate  the  Concentra¬ 
tion  of  Control  of  Money  and  Credit,  and  from  which  I 
quote  a  few  sentences : 

“Far  more  dangerous  than  all  that  has  happened  to  us 
in  the  past  in  the  way  of  elimination  of  competition  in 
industry,  is  the  control  of  credit  through  the  domination  of 
these  groups  over  our  banks  and  industries.  It  means  that 
there  can  be  no  hope  of  revival  of  competition,  and  no  new 
ventures  on  a  scale  commensurate  with  the  needs  of  modern 
commerce,  or  that  could  live  against  existing  combinations, 
without  the  consent  of  those  who  dominate  these  sources 
of  credit.  .  .  . 

“If  the  arteries  of  credit  now  clogged  well-nigh  to  chok¬ 
ing  by  the  obstructions  created  through  the  control  of  these 
groups,  are  opened  so  that  they  may  be  permitted  freely  to 
play  their  important  part  in  the  financial  system,  competi¬ 
tion  in  large  enterprises  will  become  possible,  and  business 
can  be  conducted  on  its  merits  instead  of  being  subject  to 
the  tribute  and  the  good  will  of  this  handful  of  self  consti¬ 
tuted  trustees  of  the  national  prosperity.”12 


11  “No  Financial  Moses  Need  Apply,”  by  John  Oakwood. 

12  Report  of  the  Pujo  Commission;  Chapter  III,  Section  17,  pp.  159 
and  161. 


CHAPTER  VII 

The  Supreme  April  Fool  Joke 


ON  April  1,  1901,  a  great  joke  was  played  on  the 
American  people — the  United  States  Steel  Corpo¬ 
ration  was  organized.  Ordinary  first  of  April  jokes 
amuse  for  the  moment,  perhaps  hurt  for  an  hour — par¬ 
ticularly  if  the  innocent  victim  has  kicked  a  brick  concealed 
under  a  hat — and  are  forgotten  in  a  day.  Not  so  the 
Supreme  Joke  of  April  1,  1901.  Conscious  of  what  wras 
being  done  to  them,  yet  helpless  to  interfere,  or  stop  it,  the 
American  people  gathered  no  amusement  out  of  the  joke 
perpetrated  against  them.  The  hurt  is  still  there,  for  they 
didn ’t  stub  their  toes  against  a  concealed  brick ;  it  was  their 
heads  that  were  seriously  injured  by  millions  of  bricks 
hurled  viciously,  wantonly,  flagrantly  and  defiantly,  and 
none  to  stop  the  performance.  The  shower  of  bricks  still 
continues,  and  the  backs  of  the  people  are  bent  and  lame 
from  the  effect  of  dodging.  The  Supreme  April  Pool  Joke 
of  1901  is  bitterly  remembered,  and  the  whole  nation  is 
today  suffering  from  its  cumulative  evil  effects. 

Preparing  the  Way 

In  the  course  of  this  book  I  shall  have  occasion  to  make 
frequent  mention  of  the  United  States  Steel  Corporation, 
or  to  repeatedly  refer  to  its  organization,  policies,  etc.,  not 
because  I  have  singled  out  this  gigantic  organization  with 
any  sinister  design  or  malicious  intent,  but  rather  because 
the  United  States  Steel  Corporation  was  the  first  real  Trust 
— organized  in  the  United  States,  and  is,  therefore,  the 
parent  Trust,  and  has  been  the  model  for  all  other  Trusts, 
combines  and  consolidations  since.  The  United  States  Steel 
Corporation  completely  illustrates  not  only  the  tendencies 


61 


62 


The  New  Capitalism 


but  also  the  logical  development  of  modern  Capitalistic 
control  of  industries  in  general.  Besides,  the  details  enter¬ 
ing  into  the  consolidation  of  the  steel  industry  are  set  forth 
with  great  perspicacity  in  the  reports  of  the  Commissioner 
of  Corporations  and  the  Senate  Committee  that  investigated 
the  consolidation  ten  years  after  its  organization.  Conse¬ 
quently  the  exhaustive  official  reports  pertaining  to  this 
particular  corporation  are  a  safeguard  against  exaggerated 
statements  that  one  might  be  tempted  to  make  when  dealing 
with  the  subject  of  Trusts  in  general.  Moreover,  no  single 
corporation  has  been  given  a  wider  publicity,  in  the  daily 
press,  as  well  as  in  the  weekly  and  monthly  periodicals. 
And  last,  but  not  least,  its  leading  officials  have  written 
articles  and  given  numerous  interviews  expressing  their 
opinions,  views  and  sentiments — and  are  known  to  the 
public  at  large.  Any  statement  I  may  make  concerning  the 
United  States  Steel  Corporation  can  easily  be  verified ;  the 
records  are  open  to  whoever  may  care  to  search  them. 

Not  a  Netv  Thing 

Trusts,  combines  and  monopolies  are  not  a  modern 
invention.  We  read  that  as  early  as  A.  D.  1552  “the  diet 
of  Nuremberg  investigated  pools,  mergers  and  trusts.’ ’ 
Monopolistic  tendencies  are  discernable  all  through  the  eco¬ 
nomic  history  of  the  world.  Syndicates,  pools,  mergers, 
combines  and  monopolies  easily  suggested  themselves  to 
those  in  an  advantageous  position.  While  in  the  United 
States,  immediately  following  the  Civil  War  and  even  prior 
thereto,  there  have  been  isolated  instances  of  attempts  at  a 
greater  control  of  certain  products  or  industries  by  groups 
of  individuals — Trusts,  in  the  insidious  sense  of  today,  did 
not  come  into  marked  existence  until  several  decades  later. 

We  do  not  often  hear  the  words  Trusts,  combines  and 
monopolies  these  days.  As  if  by  common  consent  modern 
economic  writers  rarely  mention  them;  financial  and  com¬ 
mercial  experts  prefer  not  to  speak  of  such  things.  And 
yet  there  was  a  time — not  so  long  ago — when  Trusts,  com¬ 
bines  and  monopolies  were  denounced  as  evil  things,  and 


The  Supreme  April  Fool  Joke 


63 


those  who  constituted  or  created,  or  were  identified  with 
them,  as  wicked  men.  Yet  in  the  years  when  they  were 
most  violently  attacked,  Trusts,  combines  and  monopolies 
had  not  done  one-lialf  the  economic  harm  that  can  be  predi¬ 
cated  against  them  today.  Their  tendencies,  rather  than 
their  deeds,  wTere  criticised  in  those  earlier  years. 

The  years  1880  to  19001  can  be  said  to  have  been  the 
experimental  years  as  regards  Trusts,  combines,  and  the 
monopolistic  merging  and  consolidation  of  industries,  to 
effect  which  financial  pools  and  syndicates  were  formed. 
But  each  combination  in  a  given  line  of  industry  was  more 
or  less  independent  and  in  actual  competition  with  some 
other  combination.  To  be  sure  there  were  “secret”  and 
“gentlemen’s”  agreements,  both  as  regards  production  and 
prices,  but  frequently  one  combine  less  scrupulous  than  its 
rival,  would  take  an  unfair  advantage  of  its  competitor, 
thus  weakening  the  latter,  even  bringing  him  to  the  verge 
of  ruin.  It  was  in  this  period  that  we  heard  so  much  of 
special  advantages,  rebates,  and  so  forth,  granted  to  certain 
powerful  corporations.  Standard  Oil,  you  may  recall,  was 
one  of  the  greatest  beneficiaries  of  the  system  of  railroad 
rebates. 


The  New  Era 

The  year  1901  ushered  in  the  dawn  of  a  New  Trust  Era, 
whose  possibilities  were  exemplified  in  the  organization  of 
the  United  States  Steel  Corporation.  That  the  principal 
aims  of  the  Trust  consolidation  of  industrial  plants  from 
the  very  beginning  were  to  eliminate  competition,  control 
output,  and  fix,  or  rather  increase,  prices,  is  so  well  under¬ 
stood  as  to  call  for  no  detailed  proof  at  this  late  date.  For 
the  benefit,  however,  of  those  doubting  Thomases  who,  for 
obvious  reasons,  prefer  to  enter  a  denial,  I  will  quote  a 
statement  made  by  no  less  a  person  than  Charles  M.  Schwab  : 


xThe  Standard  Oil  Co.  was  organized  in  1882;  the  American  Cotton 
Oil  Trust  in  1884  ;  the  National  Uinseed  Oil  Trust  in  1885  ;  the  American 
Sugar  Refining  Co.  in  1887  ;  the  American  Tobacco  Co.  in  1890  :  the 
General  Electric  Co.  and  the  United  States  Rubber  Co.  in  1892.  These 
are  a  few  of  the  more  important  Trusts  and  monopolies  formed  during 
the  last  two  decades  of  the  twentieth  century. 


64 


The  New  Capitalism 


“No  man  has  a  clearer  appreciation  than  myself  of  the 
evil  that  lurked  in  the  trust  scheme.  ...  It  was  founded 
on  misconception  and  promoted  along  the  lines  of  self- 
destruction.  Its  fundamental  principles  were  the  restraint 
of  trade,  increase  of  price  and  the  throttling  of  competition 
— a  trinity  that  would  wreck  any  proposition,  business, 
political,  or  social.”2 

The  Pivotal  Point 

Whether  the  throttling  of  competition,  the  limiting  of 
output  and  increasing  prices  Tbe  called  the  fundamental 
principles  or  the  principal  by-products  of  Trust  combines 
and  consolidations,  the  important  thing  to  remember  is  that 
they  were  antedated  by  the  overvaluation  and  overcapi¬ 
talization  of  the  properties  themselves. 

In  this  chapter  I  shall  confine  myself  to  those  points  that 
are  relevant  to  my  purpose,  leaving  untouched  matters  not 
immediately  germane  to  the  scope  of  this  book.  My  avowed 
purpose  is  to  show  that  overcapitalization  is  the  scarlet 
cloak  that  covers  a  multitude  of  Capitalistic  sins.  To  show 
this  authoritatively  I  propose  to  give  a  few  fragmentary 
excerpts  from  official  reports  with  regard  to  the  United 
States  Steel  Corporation,  and  from  which  the  reader  may 
draw  his  own  conclusions. 

The  Consolidation  Scheme 

Herbert  Knox  Smith,  Commissioner  of  Corporations,  in 
his  letter  of  Submittal3  (July  11,  1911)  says: 

“The  Steel  Industry  wTas  the  culmination  and  the  result 
of  a  remarkable  and  even  dramatic  period  in  the  steel 
industry.  Until  about  1898  the  bulk  of  the  business  was 
distributed  among  a  very  considerable  number  of  concerns. 
There  was  sharp  competition,  modified  by  frequent  pools 
and  price  agreements  of  greater  or  less  duration  and 
effectiveness. 

2  Report  No.  1127,  House  of  Representatives,  62nd  Congress,  Second 
Session,  Investigation  of  United  States  Steel  Corporation.  ( Referred 
to  the  House  Calendar  and  ordered  to  be  printed,  August  2,  1912.) 

3  Report  of  the  Commissioner  of  Corporations  on  the  Steel  Industry. 
(Part  1.) 


The  Supreme  April  Fool  Joke 


65 


“In  1898  began  an  era  of  great  consolidations,  with 
capitalizations  ranging  from  $30,000,000  to  $100,000,000, 
usually  mergers  of  many  smaller  companies.  In  most  of 
these,  as  in  the  earlier  price  agreements,  the  ruling  motive 
was  the  removal  of  competition.” 

But  these  mergers  did  not  immediately  produce  the 
desired  effect.  The  Steel  companies  were  still  independent 
of  and  in  competition  with  each  other.  “There  was  sud¬ 
denly  revealed  to  the  industry,”  says  the  Commissioner  of 
Corporations  in  his  letter  of  Submittal,  “what  the  trade 
press  called.  ‘  the  impending  struggle  of  the  giants,  ’  a  com¬ 
bat  between  great  concerns,  who,  under  such  circumstances, 
might  be  forced  to  work  out,  in  rigorous  competition,  the 
survival  of  the  fittest.  .  .  . 

‘  ‘  Steel  men  and  the  various  associated  financial  interests, 
regarded  the  situation  with  much  alarm.  In  such  a  com¬ 
petition  they  saw  a  great  danger  to  their  businesses,  especi¬ 
ally  to  the  profitable  gross  monopolies  in  certain  branches 
of  the  trade.  In  averting  it  they  saw  a  great  opportunity. 
The  extraordinary  era  of  industrial  expansion  was  still  on ; 
the  public  was  still  largely  absorbing  large  issues  of 
securities.  By  merging  these  conflicting  interests  into  a 
great  corporation,  the  threatened  ‘steel  war’  would  be 
averted,  and  great  profits  realized  from  the  flotation  of 
securities. 

“With  amazing  swiftness,  in  a  few  weeks,  the  United 
States  Steel  Corporation  was  thus  organized,  and  began 
business  on  April  1,  1901.  Its  total  capitalization  was  a 
little  over  $1,402,000,000  (including  bonds).  .  .  . 

“Thus  competition  between  these  concerns  was  elimi¬ 
nated,  while  enormous  profits  were  made  from  the  flotation 
of  securities,  with,  also,  an  unparalleled  stock  commission 
to  the  underwriting  syndicate,  which  netted  a  clear  profit 
of  about  $62,500,000  in  cash.”4 


4  It  is  pretty  generally  known  that  the  firm  of  J.  P.  Morgan  &  Co. 
was  the  active  underwriting  syndicate,  and  J.  P.  Morgan  the  directing 
genius  in  the  consolidation  of  the  Steel  Corporation. 


66 


The  New  Capitalism 


The  Capitalistic  Deluge 

The  report  of  the  Commissioner  of  Corporations  sets  forth 
that  the  value  of  all  the  tangible  properties  consolidated 
into  the  United  States  Steel  Corporation,  making  a  liberal 
allowance  for  everything,  did  not  exceed  $682,000,000,  and 
“that  the  entire  issue  of  approximately  $508,000,000  of 
common  stock  of  the  Steel  Corporation  in  1901,  had  no 
physical  property  back  of  it,  and  also  a  considerable  frac¬ 
tion,  say  from  one-fifth  to  two-fifths,  of  the  preferred  stock, 
was  likewise  unprotected  by  physical  properties.  Even 
granting  that  there  may  have  been  a  considerable  value  on 
intangible  considerations,  it  is  necessarily  clear  that  at  last 
the  entire  issue  of  common  stock,  except  in  so  far  as  what 
may  be  termed  ‘merger  value’  may  be  considered,  repre¬ 
sented  nothing  but  ‘water’.” 

‘  ‘  In  some  instances  stocks  were  not  ‘  watered  ’  in  the  ordi¬ 
nary  acceptance  of  that  term;  they  were  literally  deluged. 
The  cost  of  constructing,  or  reproducing  the  several  plants 
constituting  the  combine,  was  inconsequential  as  com¬ 
pared  with  the  value  of  this  new  device  for  enjoying  with 
immunity  an  old  and  hitherto  forbidden  privilege — an  abso¬ 
lute  monopoly  in  a  valuable  and  necessary  article  of  com¬ 
merce.”  (House  of  Representatives  Report  No.  1127,  p.  11.) 

How  It  Was  Done 

Among  the  ten  or  twTelve  competing  steel  corporations 
consolidated  into  the  United  States  Steel  Corporation  was 
the  National  Tube  Company  operating  17  mills. 

“Before  acquiring  these  plants,  Morgan  and  Company 
employed  Julian  Kennedy,  of  Pittsburgh,  a  most  capable 
engineer  of  long  experience  in  the  construction  and  opera¬ 
tion  of  steel  works  both  in  America  and  Europe  and  Asia, 
and  instructed  him  to  make  a  careful  estimate  of  the 
plants.  .  .  .  He  reported  to  Mr.  Morgan  that  the  actual 
value  of  these  plants  did  not  exceed  $19,000,000,  and  that 
the  owners  were  demoralized  and  disheartened.  .  .  . 

“Undismayed  by  this  dismal  report,  J.  P.  Morgan  &  Co., 


The  Supreme  April  Pool  Joke 


67 


with  an  amazing  audacity,  launched  this  new  $19,000,000 
monopoly  on  its  course  with  a  total  capitalization  of 
$80,000,000,  and  for  their  valued  services  in  thus  restraining 
the  previously  obnoxious  and  ‘destructive  competition’ 
received  as  compensation  securities  of  this  concern  aggre¬ 
gating  $20,000,000,  or  one  million  more  than  the  total  value 
of  all  the  17  tube  plants,  one  in  need  of  reconstruction  and 
six  ‘old  style,’  ‘isolated’  and  ‘not  equipped  with  modern 
facilities,’  or  on  the  verge  of  being  ‘shut  down  and  dis¬ 
mantled.  ’ 

“To  the  uninitiated  this  would  appear  to  be  an  utterly 
impossible  task.  Under  the  circumstances,  the  sudden  and 
instant  prosperity  of  the  National  Tube  Co.,  is  an  object 
lesson  of  no  little  moment,  illustrating  the  immense  power 
of  an  absolute  monopoly,  no  matter  how  inferior  or  defect¬ 
ive  or  obsolete  the  plants,  or  how  incapable  the  manage¬ 
ment  and  operation.  With  all  the  essential  elements  of 
failure,  antiquated  plants,  badly  located  and  burdened  by 
the  huge  overcapitalization,  nevertheless  : 

“  ‘The  National  Tube  Co.  was  one  of  the  most  successful 
concerns  of  the  United  States  Steel  Corporation,  and  by  the 
time  it  was  acquired  by  the  latter  its  common  stock  had  a 
high  market  value  because  of  the  Company’s  earning  power. 
For  the  year  ending  June  30,  1900,  the  profits  of  this  com¬ 
pany,  after  deducting  all  expenses,  exceeded  $14,600,000, 
and  after  deduction  for  depreciation,  bad  debts,  etc.,  the 
net  earnings  were  $13,878,000.’  This,  it  will  be  seen,  was 
at  the  rate  of  35  per  cent  on  the  $40,000,000  of  preferred 
stock  outstanding,  and  the  rate  of  17  percent  on  the  total 
capitalization  of  $80,000,000  or  more  than  73  per  cent  of 
the  actual  value  of  the  entire  company. 

“In  order  to  illustrate  the  purposes,  methods,  and  effect 
of  such  consolidations,  we  have  described  somewhat  in 
detail  the  organization  and  operation  of  the  National 
Tube  Co.  In  discussing  the  other  concerns  forming  the 
so-called  ‘Morgan  group,’  this  is  not  necessary,  owing  to 
the  fact  that  the  same  scheme  for  throwing  together  into 
one  mass  ‘of  unrelated  units,’  efficient  and  inefficient,  new 


68 


The  New  Capitalism 


and  obsolete  plants  under  one  control  and  into  one  heavily 
overcapitalized  corporation,  characterized  all  the  opera¬ 
tions  of  J.  P.  Morgan  &  Co.  in  the  Steel  Industry.”* 

Pointing  a  Moral 

It  would  serve  no  particular  purpose  at  this  time  to  give 
all  the  figures  pertaining  to  all  of  the  companies  merged 
and  consolidated  into  the  United  States  Steel  Corporation. 
The  history  of  each  is  the  same;  only  the  amount  of  the 
inflation  in  each  is  different.  Thus,  for  example: 

Mr.  Morgan’s  syndicate  accepted  the  Federal  Steel  Co., 
on  a  basis  of  less  than  $33,000,000  of  actual  property, 
against  which  it  authorized  an  issue  of  $200,000,000. 

Against  the  properties  of  the  Carnegie  Co.,  whose  actual 
or  tangible  value  its  owner  had  sworn  did  not  exceed 
$75,610,104.06,  and  whose  total  assets,  according  to  the 
balance  sheets  of  the  Carnegie  Co.  (Ltd.)  on  March  1,  1900, 
amounted  to  $100,416,802.43,  the  United  States  Steel  Cor¬ 
poration  issued  $492,000,000  of  its  securities. 

Exit  the  Ironmaster — Enter  the  Capitalistic 

Entrepreneur 

“Carnegie,”  says  the  Report  (No.  1127,  p.  41),  “seems 
to  have  remained  in  blissful  ignorance  of  the  revolution  in 
methods  which  characterized  the  transfer  of  the  seat  of  the 
steel  industry  from  Pittsburgh  to  Wall  Street,  and  unmind¬ 
ful  of  the  enormous  sums  his  competitors  were  amassing 
by  the  capitalization  of  their  various  companies.  He  dis¬ 
plays  a  quaint  indifference  even  to  the  advantages  incident 
to  doing  business  as  a  corporation.  ‘If,’  says  he,  ‘you  want 
to  keep  this  country  ahead  in  steel,  you  cannot  depend 
upon  great  “Combinations.”  ’  ”  (Hearings,  p..  2419.) 

“What  is  more  remarkable,  these  fabulous  returns  from 
stock  jobbing  operations  do  not  seem  to  have  abated  in 
the  least  ‘the  iron  master’s’  inveterate  and  old  familiar 
antipathy  to  gambling  institutions  generally. 

B  Report  No.  1127,  Investigation  of  United  States  Steel  Corporation, 
pp.  12-15. 


The  Supreme  April  Fool  Joke 


69 


“I  made  them  (shares  in  the  Carnegie  Co.)  a  thousand 
dollars  so  as  not  to  render  them  gambling  instruments  in 
the  Stock  Exchange,  .  .  .  because  I  do  not  want  to 

have  partners  that  would  be  tempted  to  get  into  speculation. 
I  never  bought  a  share  in  my  life  on  the  Stock  Exchange. 
I  never  sold  a  share.  I  have  been,  you  might  say,  a  mono¬ 
maniac  on  the  subject  of  speculation.  I  have  never  touched 
it  ...  I  want  to  say  that  I  am  not  a  stock  jobber,  and 
I  never  in  my  life  associated  with  stock  gamblers.  .  .  . 

I  think  that  the  common  stock  gambler  is  one  of  the  worst 
institutions  that  a  country  can  have.  They  are  parasites 
feeding  upon  values  and  creating  none.”  (Carnegie,  Hear¬ 
ings,  p.  2538.) 

The  conflict  between  the  Carnegie  Co.  and  the  “  interests 
behind  the  Steel  Corporation  ’  ’  is  described  in  the  Report  as 
a  contest  “between  fabricators  of  steel  and  fabricators  of 
securities ;  between  makers  of  billets  and  makers  of  bonds.  ’  ’ 

Turning  One  Dollar  into  Five,  Plus 

“The  Commissioner  of  Corporations  gives  an  interesting 
account  of  the  method  by  wdiich  these  companies  ‘capital¬ 
ized  9  and  recapitalized  their  profits : 

‘ 1  In  the  organization  of  the  American  Steel  and  Wire  Co., 
of  Illinois,  in  'March,  1898,  each  $100  of  the  stock  of  the 
Consolidated  Steel  and  Wire  Co.,  one  of  the  constituent 
concerns  (and  itself  a  consolidation  of  seven  plants),  received 
$175  of  preferred  stock  and  $175  in  common  stock  of  the 
new  company,  or  $350  of  new  securities  for  every  $100  of 
the  old.  (See  Com.  Report,  p.  6.) 

“A  few  months  later  each  $100  of  the  preferred  stock 
of  the  American  Steel  and  Wire  Co.  of  Illinois,  received 
$100  in  preferred  stock  and  $60  in  common  stock,  while 

9 

each  of  the  Illinois  concern’s  common  stock  received  $120 
in  common  stock  of  the  Newr  Jersey  concern.  Thus  each 
$100  stock  of  the  old  consolidation  company  became  $490 
in  the  stock  of  the  New  Jersey  concern.  In  the  final  merger 
of  the  latter  company  into  the  Steel  Corporation,  each  $100 
par  value  of  the  preferred  stock,  received  $117.50  in  pre¬ 
ferred  stock  of  the  Steel  Corporation,  while  each  $100  (par 


70 


The  New  Capitalism 


value)  of  the  common  stock  received  $102.50  in  United 
States  Steel  common  stock.  In  other  words,  every  $100 
par  value  of  the  stock  of  the  Consolidated  Steel  &  Wire  Co. 
was  finally  transmuted  into  $528.50  par  of  Steel  Corpora¬ 
tion  securities.”  (Com.  report,  p.  176.) 

Capitalizing  Non-Existent  Assets 

“So  well  satisfied  were  the  syndicates  that  had  evolved 
this  plan  for  what  Mr.  Converse  calls  ‘  community  of  own¬ 
ership  or  unified  control  over  great  industries  as  the  only 
means  of  restraining  destructive  competition’  that  they 
began  to  treat  this  ingenious  and  illegal  device  as  a  lawful 
institution,  no  doubt  reassured  in  this  position  by  the  fail¬ 
ure  of  the  Government  to  proceed  against  them,  and  in 
their  future  operations  they  failed  to  discriminate  between 
the  cost  of  construction  or  the  intrinsic  value  of  these  prop¬ 
erties  and  earning  capacity  due  entirely  to  ‘community’  of 
ownership  and  unified  control  or  ‘potential  value’ — as 
James  Gayley  calls  it.  This  ‘combination  value’  of  the 
various  companies  since  acquired  by  the  Steel  Corporation, 
has  been  capitalized  as  a  tangible  asset,  stocks  issued  and 
bonds  sold,  all  based  upon  this  new  device,  as  a  perfect  and 
permanent  evasion  of  all  laws  prohibiting  combinations  in 
restraint  of  trade. 

“The  earning  power  of  the  American  Steel  and  Wire,  the 
Tin  Plate,  National  Tube  and  other  companies,  was  enor¬ 
mously  increased  by  virtue  of  the  complete  monopoly  which 
resulted  from  assembling  practically  all  of  the  manufac¬ 
turers  of  such  commodities  as  horseshoes,  nails,  fencing 
wire,  sheet  steel,  and  tin  plate  for  roofing  or  kitchen 
utensils,  under  one  control. 

“The  gains  incident  to  the  difference  in  the  price  of  such 
things  sold  under  competitive  and  monopolistic  conditions, 
were  but  a  small  part  of  the  amount  actually  secured  by 
these  companies  and  by  the  Morgan-Moore  and  other 
syndicates. 

“To  illustrate:  If  under  normal  conditions  these  vari- 


The  Supreme  April  Fool  Joke 


71 


ous  plants  acting  separately,  could  earn  10  per  cent,  and 
acting  collectively  they  could  earn  100  per  cent,  then  by 
discarding  any  form  of  physical  valuation,  either  the  orig¬ 
inal  cost  or  the  cost  of  reproduction,  and  taking  as  their 
sole  standard  the  new  and  artificially  created  earning 
power,  due  entirely  to  the  consolidation,  and  for  that  reason 
aptly  termed,  ‘  combination  value,  ’  then  ten  assembled 
plants  were  worth  ten  times  as  much  with  the  acquired 
monopoly  of  the  business  as  the  same  ten  plants  would  have 
been  worth  acting  separately  and  in  competition.  And 
these  immense  aggregations  were  created  and  capitalized 
upon  that  principle;  neither  in  the  incorporation  of  the 
Steel  Corporation  nor  of  the  subsidiaries  which  preceded 
it,  now'  under  discussion,  has  there  been  any  serious  attempt 
to  deny  that  the  greater  part  of  the  securities  of  these  com¬ 
panies  has  any  other  element  of  value. 

“  ‘Everybody  knowrs,  ’  said  W.  II.  Moore,  of  the  Moore 
syndicate,  ‘what  they  are  getting  vrhen  they  get  common 
stock  (in  the  Tin  Plate  Co.).  They  know  they  are  not 
getting  anything  that  represents  assets’.7’  (Reports  Indus¬ 
trial  Commission,  vol.  1,  p.  932;  hearing  pt.  63. )6 

The  Established  Fact 

But  I  am  not  interested  in  tracing  the  genesis  of  the 
United  States  Steel  Corporation,  and  shall  not  particularly 
concern  myself  at  this  time  with  all  the  successive  steps  and 
immediate  processes  of  its  metamorphosis,  such  as  the  pools 
and  agreements,  sundry  schemes,  covenants  and  devices, 
employed  by  way  of  creating  monopolies,  restraining  or 
preventing  competition,  artificially  increasing  prices,  con 
trolling  or  curtailing  output,  etc.  The  one  thing  I  want  to 
emphasize  is  the  fact  of  overcapitalization,  and  if  the  reader 
will  keep  the  salient  points  of  these  few  extracts  from  the 
official  reports  with  regard  to  the  United  States  Steel  Cor¬ 
poration  before  him,  he  wfill  be  able  to  follow  the  succeeding 
chapters  with  an  increase  of  interest  and  understanding. 


6  Report  No.  1127,  Investigation  of  the  United  States  Steel  Corporation. 


CHAPTER  VIII 


The  Principle  of  Inflation 


IT  was  not  long  before  the  sundry  Capitalistic  explana¬ 
tions  advanced  to  justify  the  outrageous  overcapitali¬ 
zation  of  the  big  corporation,  viz.,  * ‘ monopoly, ”  “ com¬ 
munity  of  ownership  and  unified  control,”  “potential 
value,”  “merger  value, ”' “combination  value”  and  their 
variants,  were  discarded  by  economic  writers  who  favored 
and  defended  Trusts  and  all  they  implied,  for  the  reason 
that  it  was  soon  discovered  that  mention  of  these  things 
was  as  a  red  rag  to  the  general  public.  Reluctantly  at  first, 
it  was  admitted  that  what  had  really  been  capitalized  was 
the  immense  profits  of  those  corporations.  Mr.  Gary  him¬ 
self,  under  pressure,  admitted  before  the  Ways  and  Means 
Committee,  that  it  wasn’t  plant  values  that  had  been 
capitalized — but  profits.1 

Professor  Edward  Sherwood  Mead,  of  the  Wharton 
School  of  Finance  and  Economy,  of  the  University  of 
Pennsylvania,  in  his  “Trust  Finance,”2  says,  (p.  291)  : 

“The  capitalization  of  a  corporation  is  the  face  or  par 
value  of  the  stocks  and  bonds  which  the  corporation  has 
issued.  .  .  .  There  is  general  agreement  upon  this 

definition  of  capitalization,  and  its  discussion  need  not, 
therefore,  detain  us.”  .  .  . 

“We  may  define  overcapitalization  as  that  condition  in 
which  the  par  value  of  the  securities  of  a  company  exceeds 
their  actual  value  based  on  profits.” 

It  is  not  necessary  to  give  definitions  from  other  economic 


1  Mr.  Cochran.  Of  this  whole  sum  of  $1,782,000,000  was  not 
$1,000,000,000  at  least  capitalized  profits,  as  distinguished  from  original 
investment? 

Mr.  Gary.  I  shall  have  to  guess  at  that ;  but  I  shall  guess  yes, 
including  increases  in  value.  (See  Hearings  Ways  and  Means  Com¬ 
mittee,  1908  and  1909  ;  see  Hearings,  pt.  63,  p.  240,  Appendix.) 

2  Chapter  X  VI  “The  Capitalization  of  Corporations.” 

72 


The  Principle  of  Inflation 


73 


writers,  for  they  are  practically  agreed  with  regard  to  the 
essentials,  differing  only  in  phraseology.  According  to 
Professor  Mead,  the  difference  between  capitalization  and 
overcapitalization  is  one  of  degree  only.  In  reality  there 
is  no  distinction  between  the  two.  He  considers  an  issue 
of  stocks,  no  matter  how  much  in  excess  of  actual  assets,  as 
legitimate  capitalization.  Only  if  the  par  value  of  the 
securities  of  a  company  exceeds  the  actual  value  of  said 
securities,  based  on  profits,  does  he  consider  it  overcapi¬ 
talization. 

Actual  Value  Not  Considered 

It  is  to  be  noted  that  Professor  Mead  does  not  so  much 
as  mention  the  actual  value  of  the  properties;  he  speaks 
only  of  the  values  of  securities  based  on  profits.  According 
to  him,  and  most  other  economic  writers,  actual  value  of 
properties  does  not  enter  into  the  equation;  in  fact  it  is 
entirely  ignored.  Inflated  valuation  based  on  profits  is 
the  basis  of  the  modern  system  of  overcapitalization.  An 
issue  of  securities,  therefore,  is  based  not  upon  the  actual 
value  of  assets — but  upon  an  arbitrary  inflation  of  value 
— a  fictitious  valuation.  But  “capitalization  of  profits” 
had  a  bad  sound,  and  so  a  less  irritating  expression  was 
coined  and  shoved  into  currency.  Today  “earning  power” 
is  the  generally  accepted  basis  for  overcapitalization. 

What  is  Earning  Power ? 

The  normal  earning  power  of  capital  is,  as  a  rule,  com¬ 
puted  at  six  percent.  I  do  not  know  precisely  just  why 
six  percent  was  hit  upon  as  the  measure  of  earning  capacity, 
but  assume  it  is  because — generally  speaking — six  percent 
has  been  considered  as  a  normal  rate  of  interest,  and  also 
as  a  fair  return  upon  an  investment.  At  any  rate,  six 
percent3  of  earning  power  is  the  basis  upon  which  modern 

3  So  large  were  the  earnings  during  the  war  that  the  six  percent 
basis  was,  in  a  number  of  cases,  raised  to  eight  percent.  Professor 
H.  J.  Davenport,  in  an  article  in  The  Dial  (October  4,  1919)  tells  of  a 
certain  rubber  company  whose  “surplus  earnings  for  the  year  1917-1918 
were  equivalent  to  about  thirty  percent  on  the  common  stock  ;  and  sub¬ 
stantially  the  same  for  the  first  half  of  1919.” 


74 


The  New  Capitalism 


capitalization  is  computed.  And  this  method  of  figuring  has 
yielded  the  nefarious  system  of  overcapitalization. 

Let  me  illustrate  :  If  a  plant  actually  worth  $500,000, 
has  made  a  profit  of  $60,000,  that  $60,000  is  computed  not 
as  twelve  percent  on  $500,000,  but  as  being  the  equivalent 
of  six  percent  on  one  million  dollars.  This  showing,  accord¬ 
ing  to  Capitalistic  logic,  or  the  higher  mathematics  of  the 
Capitalistic  System,  justifies  capitalizing  the  plant,  orig¬ 
inally  worth  $500,000,  at  a  million  dollars. 

The  following  year,  let  us  say,  the  profits  of  the  same 
plant  are  $120,000.  This  under  the  Capitalistic  System  of 
computing  “earnings”  would  not  be  considered  as  twenty- 
four  percent  on  $500,000,  or  twelve  percent  on  one  million, 
but  as  if  six  percent  had  been  earned  on  two  million  dol¬ 
lars;  and  therefore  an  increase  in  the  capitalization  up  to 
two  million  would  be  perfectly  justified;  for,  as  Professor 
Mead  declares  (p.  298),  capitalization  contains  “two  prac¬ 
tical  implications:  First,  that  the  capitalization  of  a  new 
company  shall  be  based  upon  a  conservative  estimate  of  its 
earning  power;  and  second,  that  this  capital  shall  be  in¬ 
creased  from  time  to  time  as  increasing  earnings  warrant.  ’  ’4 

What  If  the  “ Earning  Power ”  Decreases ? 

If  “earning  power”  computed  at  six  percent  is  a  logical 
basis  for  fixing  the  amount  of  the  capitalization  of  an 
industry  or  enterprise,  then  in  the  event  of  a  decrease  in 
the  earning  power  the  capitalization  should  be  reduced. 
But  no  such  phenomenon  is  observable.  Instead  of  reduc¬ 
ing  the  capitalization — the  value  of  the  stock  is  permitted 
to  go  down,  and  whenever  stocks  tumble  the  bona  fide 
investors  are  made  to  bear  the  brunt  of  it.  They  are  sub¬ 
jected  to  the  double  penalty  of  not  receiving  any  dividends 
besides  suffering  a  shrinkage  in  the  market  value  of  their 
securities. 

In  the  recent  admitted  decline  in  the  earning  power  of 

4  The  enormous  increase  in  the  issuance  of  industrial  securities 
during-  the  past  four  or  five  years  can  be  easily  explained  by  the 
enormous  increase  in  the  "earning  power,”  i.e.  in  the  profits  of  the 
industries. 


The  Principle  of  Inflation 


75 


practically  all  corporations  one  looked  in  vain  for  any 
marked  decrease  in  the  amount  of  capitalization.  Evidently 
basing  capitalization  on  the  principle  of  4  ‘  earning  power 7  ’ 
doesn’t  work  the  other  w’ay  round.  Par  from  reducing 
capitalization,  many  of  the  leading  corporations  have  in¬ 
creased  their  stock  and  bond  issues,  as  these  few  items, 
taken  at  random  from  hundreds  I  have  collected,  clearly 
show : 


1 :  ‘ 1  The  Sugar  Manufactur¬ 
ing  Co.  has  filed  notification  of 
an  increase  in  the  capital  stock 
from  $60,000,000  to  $90,000,000, 
and  announces  a  stock  dividend 
of  $30,000,000.  ’  ’  (December  13, 
1920.) 

2:  The  New  York  Stock  Ex¬ 
change  has  received  notice  from 
the  Wickwir e-Spencer  Steel  Cor¬ 
poration  of  a  proposed  increase 
in  its  preferred  stock  from 
$7,500,000  to  $10,000,000).  (Janu¬ 
ary  26,  1921.) 

3 :  The  New  England  Tele¬ 
graph  and  Telephone  Company 
has  called  a  special  meeting  of 
stockholders  for  New  York  on 
February  16  to  act  upon  the  in¬ 
crease  of  the  capital  stock  from 
$75,000,000  to  $100,00  0,00  0. 
Transfer  books  will  be  closed 
February  7,  and  reopened  Feb¬ 
ruary  17.  (January  26,  1921.) 

4:  The  Clay  County  &  St. 
Joseph  Railroad  Company,  oper¬ 
ating  an  electric  bus  between 
Kansas  City,  St.  Joseph  and  Ex¬ 
celsior  Springs,  has  asked  the 
state  public  service  commission 
for  authority  to  issue  $6,000,000 
of  7  percent  preferred  cumulat¬ 
ive  stock  and  $4,000,000  of  com¬ 
mon  stock.  (January  26,  1921.) 

5:  Springfield,  Ill.,  May  26. — 
The  Peoples  ’  Gas  &  Electric  Com¬ 
pany  of  Savanna  today  asked  the 
Public  Utilities  Commission  for 
authority  to  issue  $50,000  7  per¬ 
cent  preferred  stock.  The  money 
is  to  be  used  in  extension,  im¬ 


provement  and  retiring  outstand¬ 
ing  notes.  (May  27,  1921.) 

6:  “Notice  has  been  received 
by  the  New  York  Stock  Exchange 
from  the  Milwaukee  Electric  Rail¬ 
way  &  Light  Co.,  that  the  com¬ 
pany’s  authorized  issue  of  pre¬ 
ferred  stock  has  been  increased 
from  $4,500,000  to  $20,000,000. 
No  details  of  the  purpose  of  the 
proposed  increase  have  been  made 
public.  ”  (June  9,  1921.) 

7 :  “At  the  special  stockhold¬ 
ers  ’  meeting  held  in  Wilmington, 
Del.,  on  May  20  last,  the  capitali¬ 
zation  of  the  Boone  Oil  Company 
was  increased  $6,000,000,  consist¬ 
ing  of  $3,000,000  of  nine  percent 
cumulative  convertible  class  ‘  A  ’ 
stock  and  $3,000,000  of  common 
stock.  ”  (  June  9,  1921.) 

8:  The  Winther  Motor  Truck 
Company  has  changed  its  name  to 
Winthers  Motors,  Inc.,  and  the 
capital  has  been  increased  from 
$22,000,000  to  $61,000,000.  The 
office  of  the  company  is  at  Ken¬ 
osha,  Wis.  (July  19,  1921.) 

9:  The  Wheeling  &  Lake  Erie 
Railroad  yesterday  applied  for 
authority  to  issue  $451,000  of  6 
percent  refunding  mortgage 
bonds  to  reimburse  its  treasury 
for  expenditures  made  for  addi¬ 
tions  and  improvements.  (Julv 
20,  1921.) 

10:  A  special  meeting  of  stock¬ 
holders  of  the  Delaware  &  Lacka¬ 
wanna  Railroad  has  been  called 
for  today  for  the  purpose  of  au¬ 
thorizing  an  increase  in  the  road ’s 


76 


The  New  Capitalism 


capitalization  by  $45,000,000.  A 
stock  dividend  of  100  percent 
probably  will  be  declared  by  the 
directors  at  their  next  regular 
meeting,  July  28,  provided  the 
shareholders  approve  the  increase 
in  capitalization.  There  is 
$42,227,000  stock  outstanding. 
Last  April  the  Interstate  Com¬ 
merce  Commission  approved  the 
proposal  of  the  road  to  capitalize 
part  of  its  surplus,  which  amounts 
to  about  $90,000,000.  (July  21, 
1921.) 

11 :  The  St.  Louis  &  San  Fran¬ 
cisco  Railroad  has  applied  to  the 
state  public  service  commission 
of  Missouri  for  authority  to  issue 
$4,578,000  6  percent  prior  lien 


mortgage  bonds.  Of  this  amount 
$4,392,000  are  to  reimburse  the 
treasury  of  the  company  for  im¬ 
provement  expenses  and  acqui¬ 
sition  of  new  property,  and 
$180,000  for  refunding  purposes. 
(August  12,  1921.) 

12:  B.  B.  &  R.  Knight,  Inc., 
has  notified  the  Massachusetts 
commissioner  of  corporations  of 
an  increase  in  its  authorized  cap¬ 
ital  stock  from  $5,000,000  to 
$8,000,000  by  authorization  of 
25,000  additional  shares  of  no 
par  common  and  30,000  addi¬ 
tional  shares,  7  percent  second 
preferred*  $100  par.  (August  15, 
1921.) 


A  Fair  Question 

If  overcapitalization,  based  on  “earning  power”  is  de¬ 
fensible,  then  I  ask  you  in  all  sincerity,  why  is  not  the 
largest  industry  in  the  United  States  overcapitalized?  Or 
let  me  put  it  thus:  Why  is  the  largest  industry  in  the 
United  States  not  capitalized  on  the  basis  of  its  earning 
power  the  same  as  every  other  industry?  I  mean  the 
Banking  industry. 

It  is  rather  singular  that  the  banks — the  primary  and 
basic  industry  of  the  Capitalistic  group — are  neither  over¬ 
capitalized  nor  capitalized  on  the  basis  of  their  earning 
power.  The  capitalization  of  all  the  national  banks  in  the 
United  States  is  somewhat  in  excess  of  one  billion  dollars. 
On  June  30,  1920,  there  were  8,019  banks  with  a  total  cap¬ 
italization  of  $1,220,781,000,  and  a  surplus  of  $984,977,000. 
The  authorized  capital  of  a  single  industrial  corporation — 
the  United  States  Steel  Corporation — is  greater  by  nearly 
a  quarter  of  a  billion  dollars  than  the  capitalization  of  all 
the  national  banks. 

Why  are  not  the  banks  overcapitalized?  Why  are  they 
not  capitalized  on  the  basis  of  earning  power?  For  surely 
every  bank  has  “earning  power.”  Indeed  the  earning 
power  of  capital  is  the  very  essence  of  the  business  of 


The  Principle  of  Inflation 


77 


banking.  Without  this  earning  power  of  capital,  banking 
institutions  would  not  be  possible,  and  could  not  exist.  If, 
basing  the  capitalization,  or  overcapitalization,  of  an  indus¬ 
try  on  its  earning  power  can  be  defended  at  all,  it  could 
certainly  be  justified  in  the  case  of  banks.  Yet  the  one 
industry  whose  very  life  and  continued  existence  depends 
on  the  earning  power  of  its  capital,  is  excluded  from  over- 
capitalization  on  that  basis.  This  is  all  the  more  remark¬ 
able  for  in  the  case  of  a  bank  the  actual  earning  power  is 
inherent  in  the  capital  employed — is  created  by  the  use  of 
the  capital  itself;  whereas,  in  an  industry,  the  “earning 
power  ’  K  is  not  inherent  in  the  capital  employed,  in  fact 
does  not  exist  until  the  productive  power  of  labor  and  the 
purchasing  power  of  the  public  are  brought  into  play.  The 
earning  power  of  the  banks  can  be  best  shown  by  the  actual 
earnings,  which,  according  to  Government  reports,  wTere  in 
excess  of  forty  percent  in  1920.  This  showing  of  “earning 
power”  would  justify  raising  the  capitalization  of  the 
banks  to  about  six  billion  dollars. 

Why? 

While  it  is  somewhat  premature  here,  since  I  intend  to 
treat  of  stock  transactions  in  another  chapter,  nevertheless 
it  is  opportune  to  ask :  Why  does  not  the  market  value  of 
stocks  of  banks  bought  and  sold  in  the  stock  market 
fluctuate  as  violently  as  the  stocks  of  industrial  and  other 
corporations  ?  Why  is  there  no  marked  speculative  market 
for  bank  stocks  as  there  is  for  industrial  stocks  ?  Why  are 
bank  stocks  not  sold  on  margin? 

To  all  these  whys  you  may  sweepingly  answer  that  the 
federal  and  state  laws  do  not  permit  the  overcapitalization 
of  banks,  nor  gambling  in  their  stocks.  Quite  true!  but 
why  is  the  legitimate  capitalization  of  banks  a  matter  of 
so  great  concern  to  federal  and  state  governments?  And 
why  do  bank  officials,  governors  of  stock  exchanges,  and 
brokers,  assume  a  different  attitude  towards  bank  stocks 
than  towards  industrial  and  other  stocks?  Why?  Why? 
Whv  ? 


78 


The  New  Capitalism 

“ Earning  Power” — A  Myth 

What  the  Capitalistic  Entrepreneurs  have  been  pleased 
to  call  the  “earning  power”  of  capital,  is,  in  reality,  a 
myth.  Capital,  except  in  the  case  of  banks,  has  no  earning 
power  of  its  own.  Not  until  after  Labor’s  productive  power, 
and  Labor’s — that  is  to  say,  the  public’s — purchasing  power, 
have  been  brought  into  play  does  Capital  take  on  an  earning 
power.  If  the  Capitalistic  Entrepreneurs  were  disposed  to 
be  honest  and  call  things  by  their  right  name  they  would, 
in  conscience,  be  compelled  to  say  that  the  capitalization, 
or  rather  overcapitalization,  of  all  the  industries,  is  based 
not  on  Capital’s  earning  power,  but  on  Labor’s  productive 
power,  plus  Labor’s  (that  is,  the  public’s)  purchasing 
power.  The  overcapitalization  of  the  industries  of  the 
United  States  on  the  basis  of  earning  power,  is,  therefore, 
a  compliment  to  Labor’s  productive  power. 

Here  we  have  one  explanation  for  the  so-called  struggle 
between  Capital  and  Labor,  more  properly  speaking,  the 
struggle  between  the  Capitalistic  Entrepreneurs  and  the 
wage  earners.  If  six  percent  is  considered  as  a  fair  return 
on  the  capital  actually  invested  in  a  given  industry;  and 
the  owners  of  said  industry  capitalize  their  productive 
properties  for  an  amount  two  to  four  times  greater  than  the 
amount  actually  invested,  they  practically  admit  (though 
they  have  cleverly  disguised  and  camouflaged  the  fact)  that 
Labor’s  productive  power,  that  is  the  profits  derived  from 
Labor’s  production,  is  the  foundation  of  their  wealth  and 
the  source  of  their  capital  accumulations.  Wage  earners, 
in  a  blundering  sort  of  fashion,  realize  that  they  are  being 
exploited  by  these  Capitalistic  Entrepreneurs,'  who  insist 
on  keeping  for  themselves  all  the  profits  derived  from 
Labor’s  productive,  plus  its  purchasing,  power.  Labor  be¬ 
lieves  that  it  is  entitled  to  at  least  a  share  of  these  enormous 
profits  derived  from  its  joint  productive  ability  and  pur¬ 
chasing  power.  Labor’s  fight  is,  therefore,  for  a  more 
equitable  distribution  of  profits,  expressed  in  terms  of 


The  Principle  of  Inflation 


79 


higher  wages.  But  I  shall  have  more  to  say  on  this  point 
further  along  in  my  book. 

“Good  Will”— What  is  It ? 

In  some  businesses  instead  of  capitalizing  profits  under 
the  guise  of  “earning  power”  it  has  been  deemed  prefer¬ 
able  to  capitalize  them  as  “good  will.”  “Earning  power” 
is  found  generally  in  corporations  that  employ  productive 
labor;  “good  will”  is  generally  employed  in  businesses 
where  productive  labor  as  such  is  not  so  much  in  evidence, 
as,  for  example,  in  merchandising  establishments,  such 
as  big  department  stores,  the  mail  order  concerns,  etc. 
However  it  is  only  a  different  name  for  the  same  disease. 
Like  “earning  power”  the  item  of  “good  will”  is  used 
to  cover  the  watered  stock  of  excessively  overcapitalized 
corporations.5 

“According  to  the  law  of  most  of  the  United  States,  and 
Great  Britain,”  says  Arthur  Lowes  Dickinson,  “capital 
stock  cannot  be  issued  except  for  value ;  but  this  legal  dif¬ 
ficulty  is  avoided  by  issuing  it  in  accordance  with  a  contract 
in  the  body  of  which  is  contained  a  statement  as  to  value 
conformable  to  the  stock  or  other  securities  to  be  issued, 
and  the  excess  of  this  value  over  that  of  the  actual  tangible 
assets  acquired  is  often  euphemistically  entitled  ‘good 
will  \  .  .  . 

“While  this  fiction  has  so  far  maintained  its  legal  sanc¬ 
tion,  it  still  remains  doubtful  how  far  an  issue  of  stock  for 
a  cash  consideration  clearly  less  than  its  par  value  is  legal, 
or  whether  if  so  issued  the  purchaser  or  broker  is  not  liable 
to  pay  up  the  whole  of  the  discount,  at  any  rate  on  liqui¬ 
dation  of  the  corporation.  ’  ’6 

5  In  many  cases  of  which  overcapitalization  can  be  predicated, 
Patents  appear  on  the  books  as  an  asset,  against  which  vast  amounts 
of  securities  have  been  issued.  I  shall  not  deny  that  a  Patent  is  an 
asset ;  indeed  were  it  not  for  his  Patent  many  an  inventor  or  manu¬ 
facturer  would  not  be  in  business  at  all.  A  Patent  that  gives  to  an 
individual  or  corporation  the  exclusive  rig-ht  to  manufacture  a  certain 
article,  is  valuable,  however,  only  because  it  confers  a  monopoly.  It 
is  this  monopoly ,  rather  than  the  invention  itself,  that  is  capitalized. 

6  “Accounting- — Practice  and  Procedure,”  by  Arthur  Lowes  Dickin¬ 
son,  (pag-e  127). 


80 


The  New  Capitalism 


Once  Upon  a  Tune 

There  was  a  time  in  the  history  of  business  when  “good 
will”  really  signified  something  and  could  justly  be  con¬ 
sidered  as  an  asset  in  the  transfer  or  sale  of  an  established 
business.  For,  when  a  man,  in  competition  with  many 
others,  had  built  up  a  reputation  for  square  dealing,  trust¬ 
worthiness,  superior  quality  of  goods,  service,  etc.,  it  was 
only  fair  that  the  successor  reaping  the  benefit  of  another ’s 
reputation,  work,  intelligence,  character  or  what  not,  should 
pay  a  reasonable  amount  for  the  advantages  accruing  to 
the  business  which  he  took  over.  But  in  those  days  “good 
will”  was  never  computed  at  an  excessive  figure  over  and 
above  the  true  value  of  the  tangible  assets.  If  I  am  per¬ 
mitted  a  guess  based  on  a  dozen  or  so  cases  that  came  within 
my  personal  observation,  I  should  say  that  the  amount  paid 
for  the  ‘  ‘  good  will  ”  of  an  established  business,  ranged  from 
ten  to  twenty-five  percent  of  the  purchase  price  paid  for 
the  property  itself.  Moreover,  while  the  amount  paid  for 
“good  will”  was  naturally  charged  up  to  investment,  it 
did  not  have  a  tendency  to  materially  increase  prices,  for 
in  those  days  competition  was  keen,  and  it  was  necessary 
for  a  manufacturer  or  merchant  to  stay  within  the  limits 
observed  by  his  competitors. 

Briefly,  in  those  days,  “good  will”  did  not  appear  on 
the  books  as  an  asset  on  which  a  dividend  had  to  be  earned 
or  paid.  In  fact  the  continued  and  growing  patronage  of 
the  public  constituted  the  “good  will”;  nor  were  the  cus¬ 
tomers  x>enalized  for  their  continued  patronage  by  being 
made  to  pay  a  bigger  price  for  the  goods  they  purchased. 

It’s  D  iff  event  N  ow 

But  since  the  birth  of  the  Capitalistic  System  “good 
will”  has  ceased  to  have  any  meaning.  Not  only  is  it  con¬ 
sidered  as  an  asset  on  which  a  dividend  is  to  be  earned  or 
paid;  in  most  cases  it  is  the  principle  asset,  and  is  often 
caxntalized  for  more  than  the  plants  of  a  corporation.  One 
of  the  big  merchandising  firms  in  the  United  States  has 


The  Principle  of  Inflation 


83 


placed  a  value  of  twenty-seven  million  on  its  plants;  and 
a  value  of  thirty  million  on  “good  will.”  Its  total  capital¬ 
ization  is  $115,000,000. 

The  Decline  in  “Good  Will” 

Incidentally  let  me  add  that  during  the  past  few  years 
the  business  of  the  firm  I  have  in  mind  has  decreased  from 
twenty-five  to  thirty-five  percent.  Consequently,  if  logic 
is  to  prevail,  it  can  be  said  that  the  “good  will”  of  this 
particular  firm  has  declined  from  one-fourth  to  one-third. 
Therefore,  the  capitalization  of  the  “good  will”  should  be 
reduced  proportionately.  But  there  has  been  no  reduction 
in  the  capitalization;  the  shrinkage  has  been  in  the  value, 
or  market  price,  of  the  securities.  The  bona  fide  investor, 
as  usual,  must  bear  the  brunt  of  the  depreciation ;  he  alone 
suffers  a  loss  of  dividends  and  in  the  value  of  the  securities 
he  purchased. 

“Good  will,”  as  Capitalistically  employed,  is,  more  prop¬ 
erly  speaking,  ‘  ‘  bad  will.  ’  ’  At  any  rate  when  the  inflated 
securities  issued  against  it  are  offered  daily,  and  bought 
and  sold  on  the  market  as  if  “  good  will  ’  ’  were  a  commodity 
whose  value  fluctuates,  quoted,  perhaps,  at  100  on  the  first 
of  the  month  and  worth  only  fifty  cents  on  the  dollar  a  few 
weeks  later ;  paying  dividends  one  year,  and  none  the  next 
— “good  will”  is  not  markedly  in  evidence. 

In  plain  language,  “earning  power”  and  “good  will” 
are  nothing  more  than  Capitalistic  devices  invented  to  con¬ 
ceal  the  cardinal  crime  of  OVERCAPITALIZATION. 

Just  Inflation 

When  we  speak  of  Overcapitalization  or  Inflation,  the 
mind,  somehow,  harps  on  the  inflated  valuation  of  corpo¬ 
rations.  Yet  that  is  only  half  the  story.  Inflation  is  the 
order  of  the  day,  and  it  is  universally  practiced.  Inflation 
to  the  right  of  us;  inflation  to  the  left  of  us;  inflation  in 
front  of  us ;  inflation  all  around  us ; — inflation  everywhere, 
based  on  false  valuations  arbitrarily  raised  to  the  uttermost 
limit. 


82 


The  New  Capitalism 


I  want  to  make  this  perfectly  clear,  and  I  ask  the  reader 
to  keep  it  in  mind — viz.,  that  when  I  speak  of  Overcapital¬ 
ization  or  Inflation  I  do  not  mean  only  the  overcapitalized 
corporations,  and  which  issue  stocks  and  bonds  against  a 
greatly  inflated  valuation ;  I  also  include  inflated  values  of 
properties  that  are  not  incorporated,  such  as  real  estate, 
land,  etc.  In  many  cases  the  inflation  predicable  of  such 
properties  is  even  greater  than  the  inflation  of  corporate 
properties. 

I  will  not  take  a  narrow  view  of,  nor  a  niggardly  stand 
on  value.  I  can  subscribe  to  a  healthy,  fair  and  reasonable 
increase  in  the  value  (price)  of  property,  especially  if  the 
increase  is  computed  on  an  absolutely  fair  and  reasonable 
basis.  I  have  nothing  to  say  against  a  gradual  and  natural 
increase,  but  I  protest  against  sudden  and  tremendous 
increases — in  brief  against  artificial,  excessive  and  arbi¬ 
trary  inflation. 

This  “ inflation’ 1  of  valuation  is  now  general,  particularly 
with  regard  to  the  valuation  of  real  estate  in  the  big  cities. 
It  has  given  us  excessively  high  rents.  See  for  yourself 
how  it  works :  If  I  occupy  a  house  whose  value,  inclusive 
of  the  land,  is  $5000,  and  the  landlord  computes  rental  at, 
let  us  say,  ten  percent  on  the  actual  value  or  the  fairly 
computed  amount  invested,  I  will  have  fairly  reasonable 
rent.  But  if  the  landlord  raises  the  “value”  of  the  prop¬ 
erty  which  I  occupy  to  $10,000,  it  is  easy  to  see  that  he  will 
demand  an  excessive  rent  in  order  to  earn  ten  percent  on 
the  inflated  valuation. 

But  it  is  not  only  residential  property  whose  “value” 
has  been  raised  to  the  topmost  limit.  Business  property 
of  all  kinds,  factories,  offices  and  stores  have  been  included 
in  the  general  scheme  of  inflation,  with  the  result  that  the 
occupants  pay  the  higher  rentals  and  pass  them  along  to 
the  public.  And  the  same  process  of  “passing  it  along” 
applies  to  every  line  of  business  or  form  of  property  of 
which  inflation  can  be  predicated.  And  the  non-investor 
is  “the  goat.” 


CHAPTER  IX 


The  Volume  of  Inflation 

0 

THE  overcapitalization  of  the  corporate  enterprises  in 
the  United  States  is  simply  fabulous.  Under  cor¬ 
porate  enterprises  might  be  included  every  kind  of 
corporate  property — railroads,  transportation  systems,  pub¬ 
lic  utilities,  manufacturing  industries,  mining  and  sundry 
other  enterprises.  But  the  paucity  of  statistics  pertaining 
to  these  different  property  classifications  makes  computa¬ 
tion  of  their  actual  value  and  their  fictitious  valuations 
difficult,  almost  impossible.  Besides  it  is  not  necessary  for 
the  immediate  purposes  of  this  book.  I  shall,  therefore, 
confine  myself  in  this  chapter  to  the  one  kind  of  corporate 
properties  for  which  fragmentary,  rather  than  approximate 
data  are  available — viz.,  the  manufacturing  industries. 

If  I  were  put  to  the  necessity  of  making  an  estimate — 
not  a  wild  guess,  but  an  estimate  based  upon  careful  com¬ 
putations — I  should  say  that  the  overcapitalization  of  the 
manufacturing  industries  in  the  United  States  is  four  times 
greater  than  the  actual  value  of  the  properties.  This  has 
been  shown  by  actual  figures,  as  regards  the  United  States 
Steel  Corporation,  by  which,  in  round  numbers,  $500  of  se¬ 
curities  were  issued  for  every  $100  of  actual  value  of  phys¬ 
ical  assets.  Making  due  allowance  for  the  passing  of  twenty 
years  of  time,  and  taking  everything  into  consideration, 
and  also,  above  all,  because  I  want  to  be  conservative  and 
fair  to  those  concerned,  I  will  say  that  the  overcapitaliza¬ 
tion  of  the  manufacturing  industries  today  is  approximately 
twice  the  amount  of  the  actual  value  of  the  properties  capi¬ 
talized.  That  is  to  say,  for  every  dollar  of  actual  value — 


83 


84 


The  New  Capitalism 


value  fairly  and  liberally  computed — of  the  productive  in¬ 
dustrial  properties  in  the  United  States,  two  dollars  of 
inflation  have  been  added. 

“Where  Ignorance  is  Bliss — ’Twere  Folly 

to  be  Wise” 

If  we  had  complete  data  for  all  industrial  properties,  if 
we  had  the  complete  figures  for  all  the  industrial  corpora¬ 
tions  in  the  United  States,  if  we  had  the  totals  pertaining  to 
the  capitalization  of  these  properties  and  the  amount  of 
securities,  common  and  preferred  stock  outstanding,  and 
bonds  and  notes  issued,  we  could  at  least  approximate  the 
total  amount  of  inflation.  But  unfortunately,  and  for 
reasons  that  we  need  not  inquire  into  at  this  time,  this 
important  information  has  never  been  put  into  concrete 
shape  for  the  convenience  and  edification  of  the  general 
public.  In  such  works  as  Poor’s  and  Moody’s  Manuals 
we  find  a  wealth  of  information,  composed  of  thousands  of 
pages,  with  regard  to  the  securities,  industrial  and  others, 
but  no  tabulated  statistics  covering  these  points.  Other 
statistical  experts  seem  to  be  equally  reticent.  The  United 
States  Government,  in  all  its  hundreds  of  volumes  of  star 
tistics  and  data  pertaining  to  hundreds  of  more  or  less 
interesting  subjects,  has  never  attempted  to  publish  any 
statistics  that  would  throw  a  definite  light  on  this  particu¬ 
lar  subject.  Perhaps  it  is  well  for  the  peace  of  mind  of 
the  public  at  large  that  the  statistics  pertaining  to  the 
amount  of  overcapitalization,  that  is,  of  securities,  sans 
value,  be  not  published. 

“When  Doctors  Disagree ,  Disciples  Then 

Are  Free” 

In  the  absence,  therefore,  of  any  worth-while  tabulations, 
we  are  put  to  the  necessity  of  approximating  the  situation 
from  a  correlation,  or  piecing  together,  of  fragmentary 
(and  sometimes  contradictory)  figures  having  bearing  on 
the  points  involved. 

According  to  the  1920  Bureau  of  Census  Statistics,  the 


The  Volume  of  Inflation 


85 


capital  of  275,793  manufacturing  establishments  in  1914, 
aggregated  $22,790,980,000.  In  its  latest  Summary  of  Man¬ 
ufactures,  published  October  4, 1921,  the  United  States  Cen¬ 
sus  Bureau  gives  the  capitalization  of  289,768  manufactur¬ 
ing  establishments  as  $44,678,911,000 — an  increase  of 
twenty-two  billion  in  six  years;  which  would  be  at  the 
rate  of  about  three  and  one-half  billion  a  year. 

It  is  to  be  remembered  that  ordinarily  capitalization  re¬ 
fers  to  stock;  it  does  not  take  into  account  the  bonds  and 
notes  issued  by  corporations.  If  the  figures  for  bond  and 
note  issues  could  be  obtained  and  added  to  the  stock  issues, 
the  total  securities  issued  by  the  industrial  corporations 
would  yield  a  staggering  figure. 

Unfortunately  there  are  no  detailed  statistics.  Wherever 
we  encounter  them  they  are  incomplete,  and  unsatisfactory, 
or  camouflaged,  or  so  twisted  and  turned  as  to  be  almost 
irrelevant.  For  example :  The  Statistical  Abstract  of  the 
United  States  Census  (1920)  gives  the  Journal  of  Com¬ 
merce  and  Commercial  Bulletin  of  New  York  as  the  source 
of  the  following  statistics  pertaining  to  “the  capital  in¬ 
vested  in  new  enterprises  whose  authorized  capital  equalled 
or  exceeded  $100,000.  ” 


1917  .  4,607,894,100 

1918  .  2,599,753,600 

1919  .  12,677,229,600 

1920  .  13,998,944,2001 


Total .  33,883,821,500  2 


One  may  ask:  precisely  what  is  meant  by  “capital 
invested  in  new  enterprises  ’  ’  ?  What  about  the  new  capital 
invented  from  1917  to  1920  in  old  enterprises?  And  does 
the  “capital  invested”  include  notes  and  bonds  as  well  as 
stock  issues,  or  only  the  latter? 

1  Since  January,  1921,  following’  the  decision  of  the  United  States 
Supreme  Court  that  stock  dividends  are  non-taxable,  there  has  been  a 
veritable  orgy  of  inflation  of  capitalization.  Billions  of  undistributed 
surplus  profits  that  had  been  allowed  to  accumulate  pending  the  decision 
of  the  Supreme  Court,  were  transmuted  into  securities.  In  some  in¬ 
stances  a  four  hundred  percent  stock  issue  was  distributed. 

2  According  to  the  Summary  of  Manufactures  for  1919,  published  by 
the  United  States  Department  of  Commerce,  the  capital  of  290,111 
establishments  was  $44,776,000,000. 


86 


The  New  Capitalism 


“Confusion  Worse  Confounded” 

At  any  rate,  according  to  these  statistics,  a  total  of  nearly 
thirty-four  billion  dollars  was  added  to  the  various  enter¬ 
prises  during  four  years.  Yet  we  were  told  that  in  1914 
the  capitalization  of  the  manufacturing  establishments 
amounted  to  nearly  twenty-three  billion  dollars.  Adding 
to  this  nearly  twenty-three  billion  the  nearly  thirty-four 
billion  of  “capital  invested”  from  1917  to  1920,  the  total 
would  be  fifty-seven  billion.  Yet  we  were  told  as  late  as 
October,  1921,  that  the  capitalization  of  the  manufacturing 
establishments  was  approximately  forty -five  billion — a  dif¬ 
ference  of  twelve  billion.  (And  be  it  remembered  we  have 
not  even  touched  upon  the  item  “capital  invested”  from 
1914  to  1917.) 

All  of  which  emphasizes  the  untrustworthy  character  of 
the  statistics  upon  which  many  financial  writers  base  their 
solemn  dicta  and  cocksure  asseverations. 

Let  me  give  you  one  more  example  of  the  utter  unrelia¬ 
bility  of  securities  statistics.  Please  note  that  according 
to  the  United  States  Census  Statistics  (see  statistics,  page 
85)  “the  capital  invested  in  new  enterprises”  in  1920  was 
$13,998,944,200.  Then  compare  that  with  the  following 
from  the  New  International  Year  Book  for  1920: 

“Issues  of  new  domestic  corporate  securities  in  1920 
aggregate  $3,107,000,000,  of  which  $1,157,000,000  were 
stocks.  Total  issues  exceeded  those  of  1919  by  $86,000,000. 
Of  the  total,  $416,000,000  were  offered  by  railroads,  and 
$2,691,000,000  by  industrial  concerns.  The  amount  of  new 
long  term  municipal  bonds  issued  was  $653,000,000,  while 
loans  of  foreign  companies  and  corporations  placed  here 
aggregate  $345,000,000.  It  would  thus  appear  that  the 
grand  total  of  security  issues  in  this  country  in  the  year 
1920,  exceeded  $4,000,000,00.” 

Ten  Billion  Dollars  of  Securities  a  Year 

What  do  you  make  of  it?  Isn’t  it  confusing?  But  let 
us  proceed ;  perhaps  light  will  break  through  a  rift  in  the 
clouds. 


The  Volume  of  Inflation 


87 


The  Wall  Street  Journal,  which  ought  to  know  whereof 
it  speaks,  early  in  1921,  in  an  endeavor  to  explain  the  great 
decline  in  stocks  and  sundry  securities,  gives  a  list  of  ten 
reasons  for  the  decided  downward  movement,  among  which 
we  find  these  three: 

“Flotation  of  companies  at  inflated  valuations,  par¬ 
ticularly  petroleum  companies  without  established  merit. 

“Too  many  securities  for  the  public  properly  to  digest. 
As  an  example,  over  four  hundred  issues  were  recently 
traded  in  on  the  New  York  Stock  Exchange  in  a  single 
five-hour  session.  Close  to  one-third  of  the  issues  were 
stocks  listed  over  the  last  year  or  two.  In  three  years  there 
has  been  an  increase  in  total  of  public  and  private  bonds 
and  stocks  listed  on  the  New  York  Stock  Exchange  of 
something  like  $30,000,000,000,  or  at  the  rate  of  $300  per 
capita.  Add  new  stocks  not  listed,  and  the  total  will  reach 
a  much  larger  figure. 

“Billions  in  new  financing,  including  flotation  of  hun¬ 
dreds  of  millions  of  dollars  of  foreign  securities  in  this 
market.  ’ 9 

From  this  confusion  of  conflicting  statistics  I  return  to 
my  original  statement  made  in  the  beginning  of  this  chap¬ 
ter,  viz.,  that  for  every  dollar  of  actual  value  of  the  pro¬ 
ductive  industrial  properties  in  the  United  States,  two 
dollars  of  inflation  have  been  added. 

The  Public  Pays  the  Interest 

If  we  accept  the  statistics  of  the  United  States  Census 
Bureau,  published  October  4,  1921,  according  to  which  the 
capitalization  of  289,768  manufacturing  establishments  is 
$44,678,911,000 — forty-five  billion  in  round  numbers — then 
the  actual  value  of  the  plants  would  be  fifteen  billion  dol¬ 
lars,  and  thirty  billion  would  be  sheer  inflation.  But  the 
public  is  paying  interest  on  this  thirty  billion  of  inflated 
capitalization.  Computing  the  interest  at  six  percent  the 
public  is  being  mulcted  of  $1,800,000,000  a  year  on  this  one 
item  alone.  In  addition  to  capital  stock  there  are  bond  and 
note  issues  against  the  inflated  valuation  of  the  industrial 


88 


The  New  Capitalism 


properties,  on  which  the  public  is  also  paying  interest. 
And  mark  you  well !  this  is  predicated  only  of  manufactur¬ 
ing  establishments;  it  does  not  include  railroads,  public 
utilities,  mines,  etc.,  for  which  I  shall  make  no  estimate  for 
the  present.  You  may  make  your  own  computations  if  you 
care  to  pursue  the  subject  further. 

A  “ Saltus  Lyricus” 

Now  for  an  abrupt  transition.  Two  lessons  at  least,  we 
learn  from  this  chapter,  and  they  stand  out  clear  and 
strong  from  the  maze  of  stupendous  figures  and  conflicting 
statements.  They  are : 

1 :  That  the  aggregate  corporate  securities  issues  are  simply 
tremendous. 

2  :  That  the  securities  issues  are  out  of  all  proportion  to  the 
actual  value  of  the  properties  against  which  they  are 
issued. 

Writing  at  a  time  (1883)  when  pools,  syndicates  and 
mergers  were  in  their  experimental  stages,  and  consolida¬ 
tions,  monopolies  and  Trusts  in  their  infancy;  when  stock 
and  bond  issues  were  not  so  recklessly  floated  as  at  present, 
Henry  Demarest  Lloyd3  said  that  “  Securities  have  become 
as  staple  an  article  of  production  with  us,  as  wheat,  cotton, 
oil  or  hogs.  One  million  dollars  worth  a  day  of  stocks  and 
bonds  is  needed  in  prosperous  years  to  supply  the  demands 
of  the  New  York  Stock  Exchange.  .  . 

Thirty-eight  years  ago,  according  to  Henry  Demarest 
Lloyd,  one  million  dollars  worth  a  day  of  stocks  and  bonds 
was  needed  “to  supply  the  demands  of  the  New  York  Stock 
Exchange. 9 1  Mr.  Lloyd  was  simply  horrified ;  and  yet  one 
million  dollars  a  day  was  only  about  a  third  of  a  billion 
of  securities  issues  a  year. 

How  does  that  compare  with  the  securities  issued  today? 
Basing  my  estimate  on  the  sundry  statistics  and  statements 
quoted  in  this  chapter,  I  think  it  is  exceedingly  conserva¬ 
tive  to  say  that  during  the  last  three  years  corporate  secur- 


3  “Making-  Bread  Dear,”  North  American  Review,  August,  1883. 


The  Volume  of  Inflation 


89 


ities  of  all  kinds  (stocks,  bonds,  notes)  were  issued  at  the 
rate  of  five  billion  dollars  a  year;  or  about  416  million  a 
month;  or  about  16  million  a  day;  which  is  approximately 
two  million  dollars  of  securities  every  hour  of  every 
working  day  in  the  year. 

What  pikers  they  must  have  been  in  the  times  of  which 
William  Demarest  Lloyd  wrote !  For  every  dollar  of  secur¬ 
ities  issued  in  1883  we  are  today  issuing  sixteen  dol¬ 
lars  of  securities ;  for  every  million  they  issued  thirty-eight 
years  ago,  we  are  issuing  sixteen  million ! 


“He  Babbled  o’  Green  Fields” — Shakespeare 

Even  now  I  hear  a  babble  of  voices,  all  clamoring  to  be 
heard  in  defense  and  justification  of  the  tremendously 
greater  securities  issues  of  today.  ‘‘We  have  grown  tre¬ 
mendously  in  population,  in  size,  in  wealth,  etc.,”  they  are 
saying  in  chorus. 

Aye,  we  have!  That  I  will  not  even  attempt  to  deny! 
But,  hear  me  now :  The  volume  of  ~bona  fide  business  was 
not  sixteen  times  greater  than  in  1883 ;  the  popula¬ 
tion  was  not  sixteen  times  greater ;  the  production 
was  not  sixteen  times  greater,  and  consumption  was 
not  sixteen  times  greater ;  exports  were  not  sixteen 
times  greater,  and  certainly  the  increase  in  the  physical 
assets,  or  in  the  legitimate  value  of  the  properties  was  not 
sixteen  times  greater;  then  why  should  the  volume  of 
corporate  stocks  and  bond  issues  be  sixteen  times  greater? 
Perhaps  some  economic  Solomon  will  arise  among  us  to 
explain;  perhaps  some  statistical  wizard  will  enlighten  us 
on  this  important  point,  or  some  camouflage  expert  will  set 
us  right.4 


*  Those  who  are  disposed  to  contend  that  I  have  exaggerated  the 
volume  of  securities  issued,  or  that  the  statistics  on  which  I  base  my 
estimate  are  open  to  criticism,  or  need  qualification,  are  at  liberty  to 
substitute  the  correct  figures  (if  they  have  them)  for  those  I  have 
given.  Indeed  I  shall  not  mind  if  they  cut  down  my  claim  by  fully 
one-half.  In  that  case  we  would  be  issuing  about  eight  dollars  of  se¬ 
curities  for  every  dollar  issued  in  1883.  In  that  case,  too,  I  would 
maintain  that  population,  production,  consumption,  etc.,  is  not  eight 
times  greater  than  in  1883. 


90 


The  New  Capitalism 


“How  Long ,  0  Lord ,  How  Long — ” 

How  long  is  this  debauch  of  issuing  “securities”  at  the 
rate  of  say  from  four  to  five  billion  a  year  going  to 
continue?  Where  is  it  going  to  stop?  When  will  the 
bubble  burst?  Even  though  the  tremendous  increase  were 
justified  by  growth  in  the  volume  of  business,  population, 
production,  consumption,  exports,  etc., — this  I  contend, 
that  the  end  of  possibilities  is  in  sight.  Certainly  the  enor¬ 
mous  increase  observable  from  1883  to  1920  cannot  be 
duplicated  during  the  next  thirty-eight  years ;  nor  can  the 
same  percentage  of  increase  be  maintained  for  any  length 
of  time. 


Maturing  Securities 

But  I  hear  a  murmur  among  the  defenders  of  the 
Capitalistic  System,  growing  louder  and  louder,  finally 
bursting  into  an  angry  shout  of  accusation  against  me  for 
having  overlooked  a  most  important  point,  viz.,  that  there 
are  maturing  securities  which  must  be  taken  into  account. 

That  is  a  very  good  point,  and  cognizance  must  be  taken 
of  it  in  any  book  or  article  pretending  to  discuss  the  sub¬ 
ject  of  securities  issues.  Indeed  so  important  is  this  point 
that  I  prefer  to  let  an  authority  speak  for  me. 

The  1920-21  edition  of  “Poor’s  Handbook  of  Investors’ 
Holdings,”  prepared  entirely  from  the  latest  published 
official  data,  and  including  the  holdings  of  about  three 
hundred  and  eighty  companies  additional  to  those  appear¬ 
ing  in  last  year’s  issue,  devoted  seventy-five  pages  (six 
point  type,  double  column)  to  a  list  of  securities  maturing 
from  January  1,  1921,  to  December  31,  1923.  “This  com¬ 
pilation,  ’  ’  we  are  told  in  the  preface,  ‘  ‘  covers  all  the  secur¬ 
ities  in  which  there  is  known  public  interest,  embracing 
bonds,  notes,  etc.,  of  Steam  Railroads,  Street  Railways, 
Public  Utilities  and  Industrial,  Mining  and  Miscellaneous 
Corporations.” 

These  maturing  securities  aggregate  $2,664,337,634,  which 
is  less  than  ten  percent  of  the  new  securities  issued  during 


The  Volume  of  Inflation 


91 


the  past  three  years.  In  other  words,  for  every  dollar  of 
maturing  securities  nine  dollars  of  new  securities  are 
issued ;  for  every  million  of  maturing  securities,  nine  million 
new  securities  are  issued.  Or,  to  express  it  more  in  con¬ 
formity  with  the  basis  of  calculation  adopted  in  this  chap¬ 
ter:  Securities  are  maturing  at  the  rate  of  about  880 
million  dollars  a  year;  or  about  74  million  a  month;  or 
about  $2,500,000  a  day. 

“Maturing  Securities ”  that  Perpetuate 

the  Debt 

But  that  is  not  the  end  of  our  story.  The  practice  of 
issuing  new  stocks  and  bonds  and  selling  them  in  order  to 
pay  off  the  maturing  securities,  is  growing  alarmingly.  As  a 
matter  of  fact,  many  of  the  maturing  securities  are  not 
retired ,  they  are  merely  refunded ;  and  thus  the  liability  or 
debt  is  perpetuated.  This  is  called  high  corporate  finance 
■ — a  fine  scheme  for  the  holders  of  the  maturing  securities, 
and  bankers  and  brokers,  but  it  does  not  lighten  the  burden 
for  the  non-investors,  who  will  continue  to  be  taxed  in 
order  to  pay  the  interest  on  the  new  securities  issued 
against  the  old  debt.  A  solitary  example  will  illustrate 
the  point. 

In  a  press  clipping,  dated  Washington,  May  21,  1921, 
we  read  of  a  new  bond  issue  jointly  made  by  the  Northern 
Pacific  Railway  Company  and  the  Great  Northern  Railway 
Company : 

‘‘These  corporations  have  bonds  now  due  that  amount 
to  $215,227,000,  bearing  4 y2  percent.  To  renew  this 
indebtedness  they  have  been  authorized  by  the  interstate 
commerce  commission  to  issue  $230,000,000  at  6%  percent 
interest.  The  higher  interest  is  justified  by  the  railroads 
on  the  ground  that  ‘many  brokers  whom  they  have  con¬ 
sulted’  have  advised  them  that  this  is  necessary. 

“The  new  bonds  are  nearly  $15,000,000  in  excess  of  the 
amount  of  the  indebtedness.  The  difference  goes  to  bankers, 
brokers  and  investment  dealers,  who  will  receive  a  com¬ 
mission  for  every  $100  sold.  The  market  value  of  the 


92  Tlie  New  Capitalism 

bonds — what  the  public  pays — is  $96.50  for  every  $100 
bond. 

‘  ‘  This  bond  issue  means  that  the  people  are  saddled  with 
an  additional  tax  of  $15,000,000,  at  6%  percent  interest, 
and  because  the  interest  rate  on  $230,000,000  bonds  is 
increased  from  4 y2  percent  to  6%  percent,  the  public  must 
also  pay  this  increased  wage  for  the  dollar.” 

Hundreds  of  similar  cases  could  be  cited,  all  empha¬ 
sizing  that  in  order  to  pay  maturing  bonds,  corporations 
simply  issue  new  bonds.  In  good  business  practice  the 
bonded  debts  of  a  concern  or  corporation  should  be  liqui¬ 
dated  out  of  the  earnings ;  that  is  to  say,  should  be  paid  off 
out  of  a  sinking  fund.  A  business  that  cannot  pay  off 
its  bonded  indebtedness  in  the  course  of  fifteen  or  twenty 
years,  out  of  its  sinking  fund,  is  being  mismanaged  and 
deserves  to  be  put  through  bankruptcy  proceedings.  The 
management  of  a  concern  or  corporation  that  cannot  con¬ 
duct  its  business  so  as  to  clear  it  of  its  burdening  incum¬ 
brances  is  incompetent,  and  ought  to  be  removed  by  the 
stock  and  bond  holders.  The  practice,  at  present,  almost 
universally  employed,  of  meeting  maturing  debts  by  new 
bond  issues,  is  immoral  and  reprehensible,  besides  offering 
all  kinds  of  opportunities  for  inside  jobbing,  a  phase  of 
the  subject  which  I  shall  not  discuss  at  this  time. 

Let  it  be  understood  that  I  am  not  against  the  bonding 
of  properties;  in  fact  I  accept  it  as  a  business  necessity. 
But  what  I  do  object  to  is  the  manner  in  which  maturing 
bonds  are  paid — or  rather  perpetuated — viz.,  by  the  sale 
of  other  stocks  or  bonds ;  and  most  strenuously  do  I  object 
to  this  method,  because  making  a  debt  upon  a  property 
perpetual  and  even  increasing  it,  and  the  interest  charges 
thereon,  means  compelling  the  public  to  pay  perpetual 
interest  upon  the  original  and  the  increased  debt. 

Where  the  Non-Investor  Comes  In 

There  we  have  the  nexus  of  this  whole  subject.  The  non¬ 
investor  must  pay  it  all.  Here  you  have  the  principle 
clearly  stated.  It  is  the  chief  explanation  of  the  High  Cost 


The  Volume  of  Inflation 


93 


of  Living  that  is  afflicting  the  nation.  Whether  20,  or  50, 
or  100  billions  of  inflation  has  been  added  to  the  actual 
value  of  the  properties  in  the  United  States,  it  is  a  burden 
of  ponderous  proportions  placed  upon  the  backs  of  the 
sixteen  million  families — a  gigantic  debt  against  every  man, 
woman  and  child — the  interest  on  which  must  be  paid  by 
the  non-investor  public ;  and  it  is  collected  through  the 
instrumentality  of  higher  prices.  The  greater  the  debt  the 
greater  the  interest  charge ;  the  greater  the  interest  charge 
the  higher  the  prices ;  the  higher  the  prices  the  higher  the 
Cost  of  Living.  That  is  clear! 

Not  only  is  this  debt  perpetual,  it  is  cumulative;  it  in¬ 
creases  year  after  year.  Whatever  the  exact  amount  of 
the  inflation  may  be  at  this  hour — whether  20,  or  50,  or 
100  billion — or  more  or  less — unless  radical  changes  are 
made  in  the  present  corporation  finance  methods — it  is 
likely  that  at  the  end  of  another  eighteen  or  twenty  years 
the  debt  charged  up  against  the  non-investors  will  have 
doubled  itself.  Let  me  explain  what  I  mean,  by  giving 
you  a  concrete  illustration.  Let  us  assume  that  instead  of 
cash,  J.  Pierpont  Morgan  received  62 y2  million  dollars  of 
stock  for  organizing  the  United  States  Steel  Corporation. 
That  was  the  reward  for  his  genius.  He  didn’t  put  in  a 
single  dollar,  but  the  stock  he  received  increased  his  wealth 
621/2  million  dollars.  Now,  figuring  the  interest  he  was  to 
receive  at  only  five  percent,  Mr.  Morgan  drew  from  the 
corporation  $3,125,000  a  year.  Within  twenty  years  he  (or 
his  heirs)  will  have  drawn  out  from  that  one  corporation 
alone,  62 y2  million  dollars,  or  the  full  amount  of  the  face 
value  of  the  stock  given  him.  Then  the  same  process  begins 
over  again;  that  is  to  say,  every  twenty  years  he  (or  his 
heirs)  will  have  drawn  out  62y2  million  dollars.  Within 
a  hundred  years  his  heirs  or  their  descendants,  will  have 
drawn  out  of  that  one  corporation  alone,  $312,500,000. 

The  Era  of  Super-Overcapitalization 

The  pioneer  period  of  arbitrary  overcapitalization  of 
industries  has  successfully  demonstrated  the  possibilities  of 


94 


The  New  Capitalism 


a  System  of  exploitation.  In  the  beginning  overcapitali¬ 
zation  was  computed  on  the  basis  of  a  six  percent  *  ‘  earning 
power’ 9  on  the  amount  of  capital  actually  invested.  But 
now  the  era  of  swper-overcapitalization  has  begun.  Hence¬ 
forth  the  stock  and  bond  issues  will  be  based  on  the 
“ earning  power”  of  the  inflated  valuation.  Through  the 
simple  device  known  as  declaring  “stock  dividends”  the 
overcapitalization  will  increase  automatically,  thus  making 
the  debt  perpetual  and  yielding  cumulative  interest.  This 
means  placing  a  crushing  weight  upon  the  non-investors. 

Can  they  continue  to  carry  the  load?  My  answer  is, 
they  cannot!  And  I  will  add  that  once  they  understand 
what  has  been  and  is  being  done  to  them,  they  will  not  only, 
through  their  combined  strength,  throw  off  the  burden, 
but  abolish  or  even  destroy  the  Capitalistic-Mammonistic 
Sj^stem  that  aims  to  crush  them. 


CHAPTER  X 

The  Capital  Crime  of  Overcapitalizatiox 


IT  IS  one  thing  to  say  that  overcapitalization  is  the  evil 
tree  that  has  produced,  if  not  all,  at  least  most,  of  our 
economic  troubles,  and  quite  another  thing  to  prove  it. 
It  will  not  do  merely  to  make  assertions ;  I  must  be  able  to 
give  definite  and  demonstrable  reasons  for  the  opinions  I 
hold.  For  years  I  have  held  that  overcapitalization  is  fun¬ 
damentally  wrong;  that  although  sanctioned  by  law  it  is 
wicked  and  indefensible;  economically  it  cannot  be  con¬ 
doned;  from  a  business  standpoint  it  must  be  condemned 
as  a  “delusion  and  a  snare”  and  altogether  unsound.  I 
shall  not  categorically  animadvert  on  these  points  in  this 
chapter,  but  my  collective  contention  will  be  made  clear 
when  this  work  is  taken  in  its  entirety. 

More  recently  I  have  maintained  that  overcapitalization 
is  the  fundamental  cause  for  the  High  Cost  of  Living,  and 
entirely  to  blame  for  the  decrease  in  the  purchasing  power 
of  mcney.  I  furthermore  maintain  that  the  system  of 
overcapitalization  is  responsible  for  the  system  of  inade¬ 
quate  wages,  and  the  determination  of  Capitalistic  employ¬ 
ers  to  keep  the  wages  of  the  mass  of  workers  even  below  a 
mere  living  basis.  All  these,  and  many  other  things,  I 
shall  try,  in  the  course  of  this  book,  to  prove  to  anyone 
amenable  to  reason  and  disposed  to  be  fair;  to  anyone 
whose  mind  is  not  saturated  with  Capitalistic  toxins  and 
whose  pockets  are  not  bulging  with  ill-gotten  gains — thanks 
to  the  ingenious  Capitalistic  System. 

The  Party  of  the  First  Part 

For  the  sake  of  brevity  and  greater  lucidity  let  us  con¬ 
sider  the  effect  of  overcapitalization  upon  the  two  parties 


95 


96 


The  New  Capitalism 


concerned — the  chief  beneficiaries  of  the  Capitalistic  Sys¬ 
tem — the  Capitalistic  group ;  and  the  non-beneficiaries — the 
non-investors — the  public.  The  beneficiaries  we  will  call 
the  Party  of  the  First  Part. 

Great  and  calculable  benefits  have  accrued  to  the  Capital¬ 
istic  Entrepreneurs  through  the  creation  of  ouercapital. 
Let  me  briefly  summarize  the  immense  benefits  and  mani¬ 
fold  advantages  that  redounded  to  the  Capitalistic  Entre¬ 
preneur  group : 

1 :  Overcapitalization  at  least  trebled  (in  many  cases  in 
the  beginning  quadrupled  and  quintupled)  the  wealth  of 
the  constituent  members  of  the  Capitalistic  System. 

2 :  Overcapitalization  at  least  trebled  the  profits  of  the 
beneficiaries  of  the  System. 

3 :  Overcapitalization  at  least  trebled  the  credit ,  i.e.,  the 
borrowing  power,  of  all  the  persons  concerned. 

4:  Overcapitalization  conferred  upon  every  member  in 
the  Capitalistic  group  a  greatly  increased  capacity  for 
speculating  in  stocks  and  bonds. 

These,  in  brief,  are  the  cardinal  benefits  from  which 
innumerable  minor  advantages  have  flowed,  all  emptying 
into  the  coffers  of  those  chiefly  concerned. 

Long  before  overcapitalization  of  the  industrial  corpora¬ 
tions  became  general  the  control  of  capital  and  credit  was 
centered  in  a  small  group.  Overcapitalization  increased 
the  hold  and  power  of  this  small  group,  which  automatically 
became  the  nucleus — the  heart — of  the  greater  Capitalistic 
System.  It  was  overcapitalization  that  brought  into  the 
charmed  circle  of  the  Capitalistic  Entrepreneurs,'  hundreds 
— and  their  number  in  time  grew  into  thousands — of  new 
men,  all  of  whom  can  directly  trace  their  rise  to  greater 
wealth  and  power  to  the  date  of  the  inclusion  of  their 
‘  *  recapitalized  ’  ’  corporations  into  the  System. 

The  Master  Mind 

J.  Pierpont  Morgan  was  able  to  organize  the  United 
States  Steel  Corporation  primarily  because  he  was  the  head 
of  the  banking  house  of  J.  P.  Morgan  &  Co.  In  the  finan- 


The  Capital  Crime  of  Overcapitalization  97 


cial  oligarchy  he  was  the  recognized  dictator;  his  will  was 
law,  his  mere  nod  a  command,  his  power  greater  than  that 
of  a  Czar.  But  even  a  financial  potentate  requires  some¬ 
thing  more  than  autocratic  power,  and  this  something  more, 
if  I  have  read  the  records  correctly,  J.  Pierpont  Morgan 
possessed  to  an  uncanny  degree.  No  doubt  others  before 
him  had  vaguely  sensed  the  possibilities  of  mergers,  com¬ 
bines  and  consolidations,  but  they  lacked  his  resourceful¬ 
ness,  and  so  their  visions  never  fructified.  Although  navi¬ 
gators  before  Columbus  may  have  dreamed  of  an  El  Dorado, 
only  Columbus  translated  his  dream  into  a  voyage  beyond 
the  charted  seas. 

With  all  his  dictatorial  power  Morgan  could  not  have 
successfully  organized  the  United  States  Steel  Corporation 
had  his  genius  not  prompted  him  to  perfect  the  machinery 
that  enabled  him  to  carry  out  his  plans.  The  particular 
machinery  which  carried  the  United  States  Steel  Corpora¬ 
tion,  as  well  as  every  other  ‘  ‘  reorganized  ’  ’  corporation  since, 
over  the  rocks  of  disaster  to  the  haven  of  security,  is  over- 
capitalization.  It  wasn’t  the  amount  of  money  in  Mr. 
Morgan ’s  and  the  allied  banks,  and  which  the  dictator  could 
have  commandeered  had  he  deemed  it  necessary,  that  made 
the  United  States  Steel  Corporation  a  success ;  nor  yet  the 
credit  he  might  have  commanded  in  an  emergency.  It  was 
the  amount  of  money  that  wasn’t  in  Mr.  Morgan’s,  or 
allied,  banks;  it  was  the  amount  of  money  that  didn’t  exist 
— that  had  neither  been  minted,  nor  printed,  and  for  which 
there  was  no  gold  or  silver  bullion  in  the  United  States 
Treasury  vaults,  nor  any  place  on  earth ;  it  was  the  amount 
of  wealth  that  existed  only  in  the  Morgan  mind,  and  which 
the  master  conjurer  made  his  audience  believe  actually 
existed;  it  was  the  amount  of  capital  that  his  legerdemain 
persuaded  the  world  into  imagining  into  existence  that  is 
responsible  for  the  financial  success  of  the  United  States 
Steel  Corporation,  as  well  as  every  other  so-called  success¬ 
ful  corporation  organized  since,  according  to  the  plans  and 
specifications  laid  down  by  Morgan,  the  conjuror. 

Mr.  Morgan’s  remarkable  feat  of  organizing  the  most 


98 


The  New  Capitalism 


gigantic  corporation  in  the  world,  stamps  him  less  a  wizard 
of  financiering  than  as  a  bold  necromancer,  and  master  of 
the  black  art  of  Inflation.  The  magician  on  the  stage 
shows  his  audience  an  empty  silk  hat,  over  which  he  waves 
his  wand;  and  lo,  extracts  from  it  a  white  rabbit.  Mr. 
Morgan  drew  from  his  empty  hat  not  only  a  single  white, 
unresisting  rabbit — but  hundreds  of  millions  of  wealth  and 
capital.  No  magician  ever  succeeded  in  deceiving  his  audi¬ 
ence  as  he  succeeded  in  deluding  the  people  into  believing 
that  there  was  wealth  where  there  was  no  wealth;  capital 
where  there  was  no  capital;  value  where  there  was  no 
value ;  property  where  there  were  no  assets ;  and  property 
rights  where  there  was  neither  capital,  wealth,  assets  nor 
value.  That  his  wonderful  performance  won  the  admira¬ 
tion,  applause  and  approval  of  the  men  who  found  them¬ 
selves  made  rich  over  night,  goes  without  saying.  That 
thousands  of  imitators,  lacking  *his  originality  and  genius, 
quickly  learned  the  trick  and  have  since  duplicated  his 
performance  with  a  fair  degree  of  success  to  themselves  and 
others,  is  a  matter  of  common  knowledge.  It  cannot  be 
denied  that  the  creation  of  fictitious  wealth  by  a  stroke  of 
the  pen  makes  a  powerful  appeal  to  the  imagination,  par¬ 
ticularly  since  the  wealth  thus  created  can  be  converted 
into  counterfeit  capital  and  be  made  the  basis  for  credit 
out  of  which  further  capital  accumulations  quickly  result. 

Papier  Mache  Millionaires 

It  is  a  matter  of  history  that  when  the  United  States 
Steel  Corporation  was  organized,  scores  of  men  became 
millionaires  over  night.  The  automatic  increase  in  the 
wealth  of  the  individuals  immediately  concerned  is  the  note¬ 
worthy  thing  about  this  whole  business  of  overcapitaliza¬ 
tion.  The  man  in  a  given  concern,  and  whose  holdings 
therein  are  worth,  fairly  valued,  let  us  say,  $500,000, 
twTenty-four  hours  later  considers  himself,  and  is  rated, 
worth  a  million  or  two.  His  wealth  is  increased — doubled 
or  trebled — by  a  mere  resolution  of  a  Board  of  Directors; 
his  fortune  augmented  by  a  stroke  of  the  pen. 


The  Capital  Crime  of  Overcapitalization  99 


The  inherent  immorality  of  arbitrarily  inflating  the 
wealth  of  individuals,  or  families,  from  the  million  dollars, 
fairly  computed,  to  say  three  million  dollars;  or  from  ten 
million  to  thirty  million;  or  from  thirty  million  to  ninety 
million;  or  from  one  hundred  million  to  three  hundred 
million;  and  so  on  without  limit  and  without  rhyme  or 
reason,  must  be  apparent  to  all  wThose  sense  of  decency 
is  still  able  to  function. 

Thousands  of  men  today  consider  themselves  worth  a 
certain  amount,  which,  when  reduced  to  actual  facts  and 
figures,  would  be  considerably  less.  Their  wealth  is  largely 
fictitious ;  it  has  no  assets  behind  it — nothing  more  substan¬ 
tial  than  a  mythical  ‘  ‘  earning  power  ’  ’ — which  does  not  and 
cannot  reside  in  the  fictitious  wealth  itself,  but  is  derived 
wholly  from  the  paying  power  of  the  Party  of  the  Second 
Part — the  public.  Thousands  of  so-called  millionaires  only 
imagine  that  they  are  millionaires.  I  would  not  venture 
to  ruthlessly  destroy  the  delusions  of  these  papier  mache 
millionaires  were  it  not  for  the  fact  that  they  are  hugging 
their  delusions  to  their  souls  at  my  expense — at  the  expense 
of  all  non-investors — the  public.  The  non-investors  are 
penalized  through  the  medium  of  higher  prices  for  life's 
commodities.  The  millions  of  inflation  taken  in  the  aggre¬ 
gate  now  run  far  into  the  billions.  It  is  on  this  enormous 
increase  of  non-existing  wealth  that  the  public  must  pay 
interest  and  dividends,  as  we  shall  see  in  the  course  of 
this  book. 


An  Objection  Ansivered 

“What  difference  does  it  make,"  said  a  friend  of  mine 
who  knows  my  views  but  who  has  strong  leanings  toward 
the  present  Capitalistic  System  and  would  defend  it 
against  all  attacks,  “what  difference  does  it  make  whether 
a  corporation  earning,  say  $240,000  considers  this  amount 
as  twenty-four  percent  on  a  million  dollars  invested,  or  six 
percent  on  four  million  invested?  In  other  words,  what 
difference  does  it  make  whether  the  capitalization  in  the 


100 


The  New  Capitalism 


case  given  is  one  million  or  four  million?  I  cannot  see 
that  it  makes  any  difference  at  all.” 

My  friend  is  only  one  of  thousands  who  take  this  view — 
they  cannot  see  any  difference!  “None  so  blind  as  he  who 
does  not  want  to  see !  ’  ’  May  I  not  ask  the  valiant  defenders 
of  the  present  Capitalistic  System,  and  apologists  for  all  its 
practices:  “If  it  makes  no  difference,  why  do  it?”  Evi¬ 
dently,  in  the  minds  of  those  most  concerned,  there  is  a 
difference — and  the  difference  is  strongly  in  their  favor, 
or  they  would  not  do  it.  In  the  case  given  the  amount  of 
earnings  would  be  the  same,  viz.,  $240,000;  but  the  trial 
balance  sheet  would  read  differently.  Without  the  camou¬ 
flage  of  overcapitalization  the  claim  that  capital  earns  only 
six  percent  is  exposed  as  an  outrageous  lie.  The  Capital¬ 
istic  device  of  a  mythical  six  percent  “earning  power”  is  a 
lie!  Capital,  under  the  segis  of  overcapitalization,  earns 
many  times  more  than  six  percent  on  every  dollar  actually 
invested,  as  I  shall  hope  to  establish  in  the  course  of  this 
book.  What  I  am  trying  to  establish  at  the  present  moment 
is  that  it  does  make  a  difference  whether  a  corporation 
earning  $240,000  is  capitalized  for  a  million  or  for  four 
million.  Let  me  ask:  “What  is  the  amount  actually 
invested?”  “One  million,”  says  my  friend.  Then  why 
pretend  that  four  million  are  invested?  It  is  simply  an¬ 
other  gross  lie.  And  these  lies  we  find  everywhere;  it  is 
upon  lies  that  the  Capitalistic  System  is  builded;  lies  are 
its  sustaining  props. 

When  a  corporation  overcapitalizes  two,  three  or  four 
times,  in  excess  of  its  actual  value,  it  is  but  compelling  the 
public  to  pay  interest  on  wealth  that  doesn’t  exist,  and 
dividends  on  capital  that  does  not  exist.  That  is  an  eco¬ 
nomic  injustice,  not  to  be  tolerated  much  longer. 

But  I  do  not  want  to  wander  from  my  point.  Over- 
capitalization  does  make  a  difference.  It  increases  the 
wealth  of  the  individuals  immediately  concerned  in  that 
they  are  given  securities  of  a  mythical  ‘  ‘  value  ’  ’  three  times 
as  great  as  the  actual  value  of  the  assets. 


The  Capital  Crime  of  Overcapitalization  101 


Fictitious  Borrowing  and  Trading  Power 

But  that  isn’t  all.  The  issuance,  sale,  or  conveyance  of 
securities  largely  in  excess  of  the  existing  assets,  auto¬ 
matically  increases  the  credit  facilities  or  borrowing  power 
of  the  persons  concerned.  All  of  which  is  fine  for  the  per¬ 
sons  immediately  concerned,  the  borrower;  and  a  splendid 
source  of  profit  for  the  banks,  which,  as  is  pretty  generally 
known,  are  under  the  dominance  of  the  chief  Capitalistic 
Entrepreneurs.  For,  the  inflated  securities  are  collateral, 
and  are  accepted  as  such  without  question  by  the  creators 
of  fictitious  values.  The  borrowings  are  “reinvested”  in 
other  inflated  securities.  Beyond  a  doubt  considerably 
greater  sums  of  money  can  be  made  by  the  favored  few 
than  would  be  possible  under  a  system  not  based  on  over- 
capitalization. 

Another  great  advantage  to  the  immediate  beneficiaries 
of  the  Capitalistic  System  lies  in  their  ability  to  trade  in 
and  juggle  their  securities  on  the  Stock  Exchange,  from 
which  transactions  probably  as  great,  if  not  greater,  profits 
are  derived  in  the  course  of  a  year,  than  from  their  busi¬ 
ness  enterprises. 

It  must  be  clear  that  an  increase  in  interest-bearing 
wealth  and  dividend-paying  capital;  an  increase  in  col¬ 
lateral,  which  creates  a  greatly  augmented  borrowing 
power;  which  in  turn  confers  the  power  to  use  a  larger 
amount  of  capital  to  1  i  invest 9  ’  in  other  securities,  thus  multi¬ 
plying  profits;  besides  the  opportunity  of  repeatedly  selling 
and  buying  their  own  securities,  generally  at  a  profit,  con¬ 
stitute  a  combination  of  advantages  that  are  of  incalculable 
benefit  to  any  component  member  of  the  Capitalistic  group. 
Does  overcapitalization  make  any  difference  ?  It  does !  A 
most  decided  difference!  Even  under  the  old  Capitalistic 
System  of  non-inflation — the  era  antedating  the  organiza¬ 
tion  of  the  United  States  Steel  Corporation — numerous 
benefits  accrued  to  the  proprietors,  but  at  least  they  were 
content  with  returns  on  actual  investments — not  imaginary 
investments ;  interest  on  actual  wealth,  not  fictitious  wealth. 


102 


The  New  Capitalism 


The  possibility  of  accumulating  wealth  more  or  less  real, 
and  certainly  far  in  excess  of  any  substantial  wealth  it 
would  be  possible  to  accumulate  sans  the  device  of  over- 
capitalization;  and  the  ability  to  command  credit  which 
can  be  converted  into  profit  earning  capital,  has,  naturally 
enough,  recommended  the  trick  of  overcapitalization — it  is 
nothing  more  than  a  trick,  and  a  scurvy  trick  at  that — to 
all  hungering  after  greater  wealth  and  not  particularly 
scrupulous  as  to  how  it  is  acquired. 

No  Property  Rights  Where  There  Is  No 

Property 

During  the  past  twenty  years  I  have  read  a  number  of 
ponderous  books  dealing  with  Property  and  its  Rights — 
books  in  which  the  authors  with  a  great  show  of  learning 
and  many  elaborate  legal  definitions  ably  defended  their 
thesis.  On  the  general  thesis  I  am  in  accord  with  these 
writers.  It  is  not  to  dispute  or  controvert  aught  that  has 
been  written  on  these  subjects  that  I  propose  the  question: 
Can  there  be  Rights  where  there  is  no  Property ;  or  can  the 
rights  in  a  certain  piece  of  property  be  greater  than  the 
actual  fairly  computed  value  of  that  piece  of  property? 

To  discuss  this  subject  even  half  way  would  require 
many  chapters.  I  shall  make  no  attempt  to  discuss  it. 
However,  I  will  briefly  state  the  principle  involved.  The 
acquisition  and  possession  of  property  is  a  sacred  indi¬ 
vidual  right.  All  laws  are  based  on  the  principle  that  the 
rights  of  property  are  paramount ;  and  their  interpretation 
by  courts  proclaims  the  rights  implied  by  possession  in¬ 
violable  and  impregnable.  I  accept  this  status.  I  have 
the  utmost  respect  for  property,  and  shall  always  defend 
its  rights.  But  I  maintain  that  there  are  certain  limitations 
with  regard  to  property  and  its  rights — which  no  man,  nor 
group  of  men,  has  the  right  to  transcend.  Property  own¬ 
ership  may  be  absolute ;  but  property  rights  are  only 
relative.  A  property  owner  cannot  do  with  his  property 
as  and  what  he  chooses;  there  is  a  limit  beyond  which  he 
cannot  go,  nor  be  permitted  to  go.  A  gun  is  a  piece  of 


The  Capital  Crime  of  Overcapitalization  103 

property,  the  owner  of  the  gun  a  property  owner ;  but  the 
owner  of  the  gun  cannot,  even  if  it  pleases  him,  or  is  to 
his  advantage,  shoot  his  neighbor  with  his  undoubted  prop¬ 
erty — his  gun — with  impunity. 

A  man  who  owns  a  twenty  dollar  gold  piece,  minted  by 
the  United  States  Government,  is  the  absolute  owner  of  it ; 
it  is  his  property.  All  the  legislatures  cannot  deprive  him 
of  his  property ;  the  courts  must  recognize  and  protect  his 
rights  in  it.  But  if  the  owner  of  that  twenty  dollar  gold 
piece  were  to  melt  it  in  a  pot  that  belongs  to  him,  and  mix 
it  with  cheaper  metals,  all  of  which  belong  to  him;  and 
with  tools  belonging  to  him,  converts  the  twenty  dollar 
United  States  gold  piece  into  five  twenty  dollar  counterfeit 
coins,  he  would  be  punished,  in  spite  of  the  fact  that  the 
original  twenty  dollars,  and  all  the  baser  metals,  and  all 
the  materials  and  tools  he  employed,  are  his  undisputed 
property.  Surely  there  is  none  to  assert  that  the  owner’s 
property  rights  in  a  twenty  dollar  gold  piece  is  more  than 
coextensive  with  the  actual  value  of  his  property,  nor  that 
his  absolute  ownership  gives  him  the  right  to  trample  upon 
the  rights  of,  or  defraud,  his  neighbor. 

If  the  rights  of  an  individual  in  property  of  which  he  is 
the  sole  owner  and  actual  possessor  are  circumscribed,  we 
can  certainly  challenge  the  validity  of  rights  in  property 
that  does  not  exist.  Thus,  for  example,  we  may  ask,  are 
the  property  rights  of  the  stockholders  in  a  corporation 
greater  than  the  value  of  the  properties  themselves.  If  the 
actual  value  of  the  physical  properties  of  a  corporation 
fairly  computed,  is  $100,000,  but  the  officials  of  the  cor¬ 
poration  arbitrarily  give  it  an  inflated  valuation  of  $500,000 
and  issue  against  it  $500,000  of  stock,  does  the  inflation 
process  raise  the  rights  of  the  stockholders  from  one  hun¬ 
dred  thousand  dollars  to  five  hundred  thousand?  Surely 
a  $100  stock  certificate  issued  against  $20  of  actual  value, 
confines  the  stockholders’  rights  to  the  latter  figure. 

As  a  general  proposition  I  maintain  that  there  can  be  no 
rights  where  there  is  no  property;  and  that  the  property 
rights  of  stockholders  can  be  no  greater  than  the  actual 


104 


The  New  Capitalism 


value  of  the  property  against  which  the  stock  is  issued. 
I  deny  that  corporation  officials  or  Boards  of  Directors 
have  the  right  to  arbitrarily  and  fictitiously  raise  values. 
If  they  have  this  right,  or  authority  or  power,  by  whom 
was  it  conferred?  Has  the  counterfeiter  the  right  or 
authority  or  power  to  convert  a  $20  gold  piece  into  five 
$20  counterfeit  coins?  Certainly  not!  Neither  have  cor¬ 
poration  officials  the  right  to  convert  $20  of  property  value 
into  $100  of  stock  value. 

Calling  Things  by  Their  Right  Name 

I  care  not  by  what  laws  sanctioned  nor  by  what  courts 
sustained,  the  whole  thing  is  a  crime  against  justice,  a 
violation  of  every  law  of  decency.  The  practice  cannot  be 
defended  any  more  than  the  counterfeiter  can  be  defended. 

There  is  not  a  state  in  the  Union  that  has  not  a  law  on  its 
statute  books  aimed  against  the  check-raiser  and  check 
forger.  In  some  states  it  is  considered  criminal  to  issue  a 
check  against  a  bank  in  which  its  issuer  has  no  deposits; 
and  within  recent  years  attempts  have  been  made  to  declare 
the  drawing  of  a  check  for  an  amount  greater  than  the 
drawer  has  on  deposit  a  criminal  offense. 

It  is  well  known  that  the  United  States  Government 
relentlessly  prosecutes  and  severely  punishes  the  counter¬ 
feiter.  What  happens  to  the  man  who  raises  a  ten  dollar 
bill  to  one  hundred  dollars?  Or  converts  a  twenty  dollar 
gold  piece  into  five  spurious  coins  of  a  supposed  value  of 
twenty  dollars  each?  Will  the  Government  condone  the 
offense  ?  Does  the  Federal  Court  extend  clemency  or 
mercy  to  a  counterfeiter?  Not  even  when  the  crime  was 
committed  to  provide  food  for  the  criminal’s  wife  and 
children  !x 

I  may  be  old  fashioned  and  behind  the  times ;  or  perhaps 
my  training  in  logic  was  defective,  but  for  the  life  of  me 

1  With  what  severity  the  Court  punishes  infractions  of  certain  laws 
may  be  judged  from  the  following  news  item  :  New  York,  July  20. — 
Theophilus  A.  Frey,  40,  of  Davenport,  Iowa,  was  sentenced  today  by 
Judge  McIntyre  in  General  Sessions  to  from  14  months  to  five  years  in 
Sing  Sing  prison.  Frey  is  said  to  have  sold  between  $150,000  and 
$200,000  worth  of  worthless  stock  in  a  Wyoming  oil  company. 


The  Capital  Crime  of  Overcapitalization  105 


I  can  discern  no  material  difference  between  issuing  a  check 
against  a  bank  in  which  the  issuer  has  no  deposits  and 
issuing  ‘  ‘  securities  ’ 7  against  assets  that  do  not  exist.  I  can 
discern  no  moral  difference  between  the  counterfeiter  who 
raises  a  ten  dollar  bill  to  one  hundred  dollars,  or  converts 
one  twenty  dollar  gold  piece  into  five  twenty  dollar  pieces, 
and  a  corporation  that  issues  one  hundred  dollars  of  secur¬ 
ities  against  twenty  dollars  of  actual  value. 

Through  the  instrumentality  of  overcapitalization  bil¬ 
lions  of  dollars  of  ‘ ‘ securities 7 7  (call  them  rather  ‘‘inse¬ 
curities”)  have  been  issued  against  inflated  valuations — 
i.e.,  against  a  fictitious  valuation  many  times  greater  than 
the  actual  value  of  the  existing  assets.  We  have  heard  a 
great  deal  within  recent  years  about  the  printing  presses 
of  Russia,  Germany,  Austria  and  other  European  coun¬ 
tries  turning  out  unlimited  quantities  of  paper  money.  The 
principle  upon  which  the  bankrupt  governments  of  Europe 
issue  these  vast  quantities  of  paper  money  is  in  no  wise 
different  from  the  principle  of  inflation  upon  which  cor¬ 
porations  issue  large  quantities  of  so-called  “securities”  of 
a  face  value  greatly  in  excess  of  the  actual  value  of  their 
assets. 

Actual  Value  and  Inflated  Valuation 

When  we  discuss  a  subject  of  this  kind  we  encounter  all 
kinds  of  objections.  Thus  I  have  discovered  a  disposition 
on  the  part  of  certain  passionate  defenders  of,  and  apolo¬ 
gists-  for,  the  Capitalistic  System  to  challenge  the  conten¬ 
tion  that  it  is  wrong  and  wicked  to  overcapitalize  an  indus¬ 
try  in  excess  of  its  actual  value.  ‘  ‘  What  is  value  ?  ’ ’  asked 
one  of  these  valiant  defenders.  “Who  can  say  what  a  piece 
of  property  is  actually  worth  ?  ”  To  philosophically  define 
the  word  value  and  enter  into  a  discussion  of  its  absolute 
character  and  related  characteristics,  would  require  a  sepa¬ 
rate  volume;  but  for  the  benefit  of  those  sensitive  souls, 
disposed  to  be  generous  in  defense  of  their  beloved  System, 
let  us  take  a  concrete  example. 

The  sundry  properties  that  were  consolidated  into  the 


106 


The  New  Capitalism 


United  States  Steel  Corporation  seem  to  have  had  a  value 
(most  liberally  computed)  of  $562,000,000  on  March  31, 
1901 ;  but  on  April  1, 1901,  or  thereabouts,  these  same  prop¬ 
erties  were  declared  to  have  a  value  of  $1,400,000,000.  If 
there  is  to  be  any  discussion  about  the  exact  meaning  of 
the  word  value,  or  what  constitutes  value,  it  seems  to  me 
that  I,  rather  than  those  opposed  to  me,  have  a  right  to 
ask  questions.  Who,  for  example,  gave  Mr.  Morgan  the 
right  and  the  power  to  capitalize  for  $80,000,000,  properties 
(The  National  Tube  Co.)  which  one  of  his  own  agents 
declared  were  worth,  everything  included,  only  about 
$19,000,000?  Who  gave  Mr.  Morgan  the  right  and  the 
power  to  add  to  the  “value”  of  the  properties  of  the 
Carnegie  Steel  Company,  estimated  by  Mr.  Carnegie  him¬ 
self  as  worth  between  seventy-five  and  one  hundred  million, 
a  mythical  value  of  three  or  four  hundred  million? 

When  these  elementary  questions  have  been  answered 
satisfactorily  by  those  qualified  and  possessing  authority 
in  the  premises,  I  shall  be  glad  to  discuss  the  subject  more 
fully  in  due  time.  In  the  meantime,  and  for  the  sake  of 
clarity,  I  wish  to  state  here  that  for  the  purposes  of  this 
book,  when  I  speak  of  value  of  property  I  have  in  mind 
the  amount  of  capital  actually  invested  in  the  properties 
concerned.  And  let  it  be  understood  that,  in  addition  to 
the  amount  of  capital  actually  invested,  I  am  willing  to 
make  due  allowances  and  liberal  concessions — in  brief  I  am 
willing  to  accept  a  fair  and  reasonable  estimate  of  values 
of  properties,  but  not  an  excessively  inflated  valuation, 
arbitrarily  fixed  by  interested  parties. 

When  Is  a  Crime  Not  a  Crime 

In  December,  1921,  Henry  Ford  proposed  a  plan  for  the 
financing  of  the  Muscle  Shoals  plant.  Mr.  Ford  proposed 
that  instead  of  floating  a  bond  issue  which  would  inevitably 
fall  into  the  hands  of  Wall  Street  brokers  and  bankers,  the 
Government  issue  1,500,000  new  $20  bills  ($30,000,000) 
which  he  said  would  be  backed  “by  the  imperishable  and 
inexhaustible  energy  of  the  Tennessee  river,  ’  ’  which  energy 


The  Capital  Crime  of  Overcapitalization  107 


Mr.  Ford  intended  to  harness  to  the  Muscle  Shoals  plant. 

I  shall  say  nothing  either  in  criticism  or  in  commendation 
of  Mr.  Ford’s  proposal;  it  is  of  no  consequence  at  this 
time  whether  I  consider  it  meritorious  or  otherwise.  What 
interests  us  is  the  savage  attack  made  upon  Mr.  Ford  and 
his  plan,  by  a  number  of  bankers  and  financial  writers  who 
protested  against  it  for  sundry  reasons,  chief  among  which 
was  their  contention  that  the  water  in  a  river  has  no 
stability. 

(In  comment  I  desire  merely  to  say  that  the  water  in 
the  Tennessee,  or  any  other  river,  for  the  matter  of  that, 
has  greater  “stability”  than  the  water  in  the  stocks  of 
most  of  the  Capitalistic  corporations.) 

The  aforesaid  bankers  and  financial  writers  said  that 
they  considered  the  mere  suggestion  that  the  Government 
issue  paper  money  “backed  by  nothing  more  stable  than 
the  unharnessed  power  in  the  Tennessee  river”  nothing 
short  of  a  crime. 

Isn’t  it  rather  strange  that  the  bankers  and  financial 
writers  who  pretend  to  be  horrified  at  Mr.  Ford ’s  proposal, 
have  in  all  these  years  discovered  nothing  criminal  in  the 
Capitalistic  practice  of  issuing  unlimited  quantities  of 
paper  “securities”  by  corporations  against  arbitrarily  cre¬ 
ated  and  excessively  inflated  property  “values.”  Nor  have 
they  found  anything  to  condemn  in  flooding  the  market 
(at  the  rate  of  five  or  more  billion  a  year)  with  “securities” 
based  on  nothing  more  substantial  than  a  mythical  “earn¬ 
ing  power.”  But  Mr.  Ford’s  proposal,  which  involves  the 
issuance  of  a  measly  thirty  million  real  dollars  (backed  by 
the  United  States  Government  as  well  as  by  “  the  imperish¬ 
able  and  inexhaustible  energy  of  the  Tennessee  river  ’  ’ )  they 
characterize  as  a  “  crime.  ’  ’  Who  can  understand  the  work¬ 
ings  of  the  Capitalistic  mind ;  who  can  follow  its  serpentine 
logic  ? 

As  Inflation  Increases — Value  Declines 

It  is  rather  singular  that  the  Capitalistic  economists,  so 
fecund  in  formulating  economic  ‘  ‘  laws  ’  ’  that  explain  injus- 


108 


The  New  Capitalism 


tices  against  non-investors,  and  justify  outrages  upon  the 
general  public,  have  been  so  utterly  lacking  in  vision  and 
barren  of  ingenuity  as  not  to  have  hit  upon  the  obvious 
economic  law  with  regard  to  overcapitalization.  I  hope 
they  will  not  accuse  me  of  impertinence  for  venturing  to 
formulate  a  “law”  that  should  have  been  put  into  words 
several  decades  ago.  Here  is  the  law,  stated  in  general 
terms : 

The  value  of  stocks  declines  in  inverse  ratio  to  the  in¬ 
crease  in  the  inflation  of  capitalization. 

The  greater  the  amount  of  securities  issued  the  less  valu¬ 
able  the  securities  are  bound  to  become.  If  against  the 
assets  of  a  corporation,  liberally  valued  at,  say,  one  million 
— four  million  of  securities  are  issued,  then  the  actual  value 
of  the  securities  is  twenty-five  cents  on  the  dollar.  That 
is  to  say,  there  is  only  twenty-five  cents  of  actual  value  in 
every  dollar  of  the  so-called  “securities.”  The  bona  fide 
investor  who  pays  $100  for  a  $100  stock  certificate  is  paying 
$75  for  inflation — a  value  that  does  not  exist — except  on 
paper  and  in  the  minds  of  the  officials  of  the  corporation. 
In  the  event  of  liquidation  of  an  excessively  overcapitalized 
corporation,  the  stockholders  could  not,  even  under  the 
most  favorable  circumstances,  realize  more  than  a  small 
fraction  of  the  amount  they  invested.  The  corporation 
officials  know  that  there  is  no  value  there;  indeed  it  has 
been  repeatedly  admitted  in  so  many  words.2 

Overcapitalization  Defined 

But  when  we  view  this  whole  subject  from  the  standpoint 
of  the  wage  earner — the  non-investor — a  different  vision  is 
unfolded  to  our  intelligence.  No  appeal  is  made  to  the 
imagination ;  no  thrill  of  delight  fills  the  soul.  Blunt  ques- 

2  Within  recent  years  an  ingenious  device  has  been  invented.  The 
inspiration  for  the  substitution  of  “no  par  value”  of  stock  issues,  is 
probably  to  be  found  in  a  burning  desire  to  circumvent  the  Income  Tax 
law.  But  if  so  it  is  a  case  of  killing  two  birds  with  one  stone.  Not 
only  is  the  Income  Tax  law  circumvented,  but  the  constantly  dimin¬ 
ishing  value  of  stocks  is  concealed  from  all  those  who  give  no  thought 
to  anything  except  stock  market  quotations.  Stocks  issued  without 
“par  value”  retain  their  fluctuating  gambling  value.  Unwary  investors, 
especially  “widows  and  orphans,”  are  not  expected  to  discover  nor  to 
pry  into  the  mysteries  of  this  rather  ingenious  device. 


The  Capital  Crime  of  Overcapitalization  109 


tions  as  to  the  why  and  wherefore,  and  the  significance  of 
it  all,  demand  a  comprehensible  answer.  Reduced  to  com¬ 
mon  sense  terms:  What  is  overcapitalization? 

Overcapitalization  is  the  process  of  creating  fictitious 
wealth  by  a  scratch  of  the  pen,  and  entering  it  on  the  books 
of  a  corporation  as  if  it  were  actual  capital,  regarding  it  as 
if  it  were  actual  wealth,  and  rewarding  it  as  if  it  were 
actual  capital.  Mark  you!  I  differentiate  between  actual 
capital — capital  behind  which  there  are  actual  assets,  and 
counterfeit  capital,  behind  which  there  are  no  assets.  It 
is  this  absence  of  actual  assets  that  makes  such  capital 
fictitious  wealth. 

By  cwercapital  I  mean  capital  or  wealth  that  does 
not  exist,  and  since  it  does  not  exist  it  can  have  no  earning 
power ;  and  having  no  earning  power,  it  cannot  and  should 
not  be  rewarded.  Yet  both  are  handsomely  rewarded  under 
the  system  of  overcapitalization.  Indeed  it  was  to  reward 
fictitious  wealth  and  counterfeit  capital  that  the  clever 
scheme  of  overcapitalization  was  invented. 

What  would  you  think  if  an  employer  of  a  thousand 
people  with  a  weekly  pay  roll  of  say  $25,000,  were  to  dis¬ 
tribute  another  $25,000  a  week  among  another  thousand 
men  and  women  who  did  no  work  whatever  in  his  estab¬ 
lishment?  Within  how  many  weeks,  do  you  think,  that 
employer  would  be  bankrupt,  or  would  be  restrained  as 
irresponsible,  probably  at  the  instigation  of  some  indignant 
stockholder?  Yet  that  is  precisely  what  the  Capitalistic 
System  is  doing  when  it  pays  dividends  on  tens  of  billions 
of  inflated  capitalization  and  imbues  with  an  “  earning 
power”  wealth  that  does  not  exist.  Capital  that  has  never 
been  invested  and  ‘‘wealth”  that  does  not  exist,  is  not 
entitled  to  any  reward,  any  more  than  men  and  women  who 
render  no  service  are  entitled  to  a  reward. 

Where  the  Party  of  the  Second  Part  Coynes  In 

Let  it  be  remembered  that  I  haven’t  one  word  to  say 
against  wealth  that  is  real  and  capital  that  is  actual — that 
is,  wealth  that  represents  actual  property,  and  capital  that 


110 


The  New  Capitalism 


is  covered  by  actual  assets;  to  both  I  am  willing  to  accord 
a  decent  reward.  But  when  I  speak  of  ouercapital  I  mean 
wealth  or  capital  that  does  not  exist ;  and  since  it  does  not 
exist  it  can  have  no  earning  power ;  and  having  no  earning 
power  it  cannot  and  should  not  be  rewarded.  But  interest 
on  this  non-existing  wealth;  and  dividends  for  this  non¬ 
existing  capital,  are  ruthlessly  collected  from  the  Party  of 
the  Second  Part,  from  those  who  have  no  participation  in 
the  non-existing  wealth  and  no  share  in  the  non-existing 
capital — that  is  to  say,  from  the  wage-earners — the  non¬ 
investors — the  public. 

The  summarized  effect  of  all  this  on  the  Party  of  the 
Second  Part — the  wage-earners,  the  non-investors,  the  pub¬ 
lic — can  be  expressed  in  a  few  words.  It  has  given  us  the 
phenomenon  called  the  High  Cost  of  Living.  -In  other 
words  the  people  are  compelled  to  pay  interest  and  divi¬ 
dends  on  billions  of  non-existing  wealth  and  capital.  As  a 
result  prices  have  been  advanced  to  a  point  where  wages 
are  no  longer  sufficient  to  maintain  a  decent  living  standard. 

As  long  as  corporations  overcapitalize  and  corporations 
and  individuals  are  permitted  to  collect  tribute  from  the 
public  on  an  inflated  valuation  of  their  properties — so  long 
will  there  be  unrest  and  turmoil,  bound,  eventually,  to  end 
in  disaster.  There  is  but  one  remedy.  Overcapitalization 
and  Inflation  must  be  abolished  or  destroyed. 


CHAPTER  XI 


The  Railroads — An  Object  Lesson  in 
Overcapitalization 


AS  a  “horrible  example”  of  the  evil  of  overcapitali¬ 
zation,  and  all  that  inflated  valuation  implies,  I 
point  to  the  railroads  of  the  United  States.  Prom 
1876  to  1913,  754  roads,  involving  145,176  mileage,  have 
been  under  receiverships.  During  the  year  1913  alone, 
seventeen  roads,  operating  9,020  miles,  and  having  a  gross 
capitalization  of  $477,780,820,  were  placed  in  the  hands  of 
receivers.1  From  1914  to  1919  inclusive,  seventy-seven 
additional  roads,  with  35,053  mileage,  and  a  stock  and  bond 
valuation  of  $1,793,687,304,  were  placed  under  receiver¬ 
ships.2  According  to  the  same  authority,  from  1876  to 
1919  there  were  1099  railroad  foreclosures.  Today  nearly 
all  the  roads,  according  to  the  authority  of  railroad  officials, 
are  bankrupt,  in  the  hands  of  receivers,  or  on  the  verge  of 
bankruptcy. 

This  is  passing  strange,  for  if  ever  a  business  has  had 
advantages,  and  opportunities  to  make  money,  it  is  the 
railroads.  There  isn’t  a  thing  on  your  body,  nor  in  your 
home  or  office ;  hardly  a  thing  you  eat,  or  wear,  or  use,  on 
which  the  railroads  have  not  had  a  “rake  off”  and  on 
many  articles  several  “rake  offs”;  for  nearly  everything 
that  enters  into  use  or  consumption — every  article  of  com¬ 
merce— is  transported  at  least  once,  and  frequently  two  and 
three  times  in  the  raw,  semi-finished  or  finished  state  via 
the  railroads.3 


1  “Statistics  of  American  Railways  for  1913.” 

2  “The  Manual  of  Statistics — Stock  Exchange  Handbook,  1920.” 

3  In  1913  Senator  Gore  of  Oklahoma  stated  that  the  value  of  the 
farm  products  amounted  to  six  billion  dollars,  and  that  the  railroads 
received  five  hundred  million  dollars  merely  for  hauling  them.  The 
railroads  are  today  receiving  more  than  a  billion  and  a  half  for  merely 
hauling  coal.  Take  the  item  of  freight  for  any  commodity ;  it  is  a 
colossal  sum  in  the  aggregate.  And*  the  public  pays  it  all.  And  I  am 
not  saying  one  word  about  the  “Pittsburgh  Plus”  plan,  under  which 
the  public  pays  millions  for  freight  that  was  never  expended,  on  goods 
that  were  never  hauled. 


Ill 


112 


The  New  Capitalism 


There  is  not  a  single  business  in  the  United  States  that 
has  received  greater  encouragement  or  been  given  so  much 
help,  financial  and  otherwise,  enjoyed  subsidies,  guarantees 
and  privileges;  land  grants,  the  right  of  way  and  eminent 
domain — as  the  railroads.  Prom  the  very  beginning  they 
were  considered  a  great  national  asset,  and  legislation,  both 
federal  and  state,  favorable  to  their  existence,  development 
and  growth,  was  freely  enacted. 

And  yet  today,  practically  all,  with  a  few  conspicuous 
exceptions,  are  bankrupt,  in  the  hands  of  receivers,  or  on 
the  verge  of  bankruptcy.  The  properties  are  run  down, 
equipment  and  roadbeds  are  admittedly  in  a  sorry  state, 
maintenance  and  upkeep  have  been  neglected  to  a  criminal 
degree.  So  terrible  was  the  condition  of  the  railroad  sys¬ 
tems,  so  low  was  their  efficiency,  that  when  the  Government 
took  over  the  railroads  upon  our  entrance  into  the  war,  it 
was  imperative  to  immediately  appropriate  750  million  of 
dollars  to  put  them  into  fairly  decent  condition.  The  peo¬ 
ple  of  the  United  States  were  forced  to  provide  the  750 
million  dollars  necessary  to  rehabilitate  the  railroad  prop¬ 
erties  owned  by  the  Wall  Street  Capitalists. 

It  is  well  known  that  many  of  the  railroads  have  not  been 
paying  any  dividends  on  their  stock  for  years,  besides  de¬ 
faulting  interest  on  their  bonds,  while  increasing,  rather 
than  reducing,  their  funded  debt.  Why  are  the  railroads 
in  so  critical  a  condition  today?  The  dominant  reason  is 
that  they  have  been  outrageously  overcapitalized,  while 
those  who  own  and  control  them — the  Wall  Street  Capital¬ 
ists — have  been  reaping  enormous  incomes  variously  dis¬ 
guised  as  expenses,  fixed  charges,  reserves,  etc.,  on  an 
inflated  valuation. 

Inflated  Valuation 

There  are  some  financial  writers  who  would  have  us 
believe  that  the  railroads  are  not  overcapitalized.  Their 
claim  is  disproved  by  the  known  facts.  One  has  but  to 
delve  into  the  history  of  some  of  the  prominent  roads  to 
discover  OVERCAPITALIZATION  and  INFLATION 


The  Railroads — An  Object  Lesson  113 


written  in  big  letters  all  over  the  properties.  Moreover, 
official  investigations  of  some  of  the  modern  railroad  scan¬ 
dals  brought  many  ugly  things  that  had  to  do  with  watered 
stock  and  stock  jobbing,  to  light.  Besides  there  are  Court 
records  that  substantiate  the  fact. 

About  ten  years  ago  the  capitalization  of  all  the  railroads 
was  said  to  be  fifteen  billion  dollars.  With  these  attentive 
ears  of  mine  I  heard  Senator  Cummins,  co-author  of  the 
Esch-Cummins  Bill,  publicly  declare  at  that  time  that  “one- 
half  of  this  amount  is  ‘water’.”4  Yet  not  long  ago  the  Inter¬ 
state  Commerce  Commission,  basing  its  estimate  on  that 
ingenious  Capitalistic  device  ‘  ‘  replacement  value,  ’  ’  gave  to 
the  railroad  properties  a  valuation  of  $18,900,000,000,  and 
it  is  upon  this  valuation  that  the  Esch-Cummins  law  in¬ 
structed  the  Board  to  adjust  rates  so  as  to  yield  a  return 
of  six  percent.5 

There  may  be  those  who  see  nothing  wrong  in  the  Capital¬ 
istic  inflation  device  called  “replacement”  valuation.  I  am 
sorry  for  them,  and  I’ll  not  argue  with  them.  But  I  •’ll 
state  my  objection  to  the  “replacement”  device  in  the 
briefest  possible  form.  “Replacement”  valuation  means 
that  the  public  is  being  charged  interest  on  an  investment 
that  was  never  made,  interest  on  high  wages  that  were  not 
paid,  interest  on  high  priced  materials  that  were  not  used, 
interest  on  stocks  that  have  no  assets  behind  them,  interest 
on  bonds  issued  against  nothing. 

Oh,  yes,  I  know  that  ‘  ‘  replacement  valuation  ”  is  in  gen¬ 
eral  use — but  that  doesn’t  make  it  right.  And  its  general 
use  explains  many  things  that  enter  into  the  High  Cost  of 
Living  problem.  For  example:  One  of  the  reasons  why 
rentals  are  high  is  because  they  are  based  on  a  “replace¬ 
ment  valuation  ’  ’ ;  the  tenants  are  charged  high  rents  com¬ 
puted  on  high  wages  that  were  not  paid,  and  high  priced 

4  This  statement  was  made  on  the  stage  of  Orchestra  Hall,  Chicago. 
I  sat  within  twenty  feet  of  the  speaker. 

5  Edgar  E.  Clark,  Chairman,  said  that  the  Commission  based  its 
“valuation”  first,  on  the  cost  of  reproduction  as  of  the  date  of  valuation ; 
then  upon  the  cost  of  reproduction  less  depreciation,  which  represents 
the  depreciated  condition  of  the  property  as  of  that  date ;  and  then 
the  actual  cost  to  date. 


114 


The  New  Capitalism 


materials  that  were  not  put  into  the  building,  etc.  Those 
afflicted  with  moral  obliquity  may  defend,  but  they  cannot 
justify,  the  practice. 

t 

An  Old — But  not  the  Sweetest  Story 

Ever  Told 

1  ‘  Replacement  valuation  ’  ’  is  only  a  new  name  for  an  old 
Capitalistic  crime.  Almost  from  the  very  beginning  the 
railroads  adopted  bookkeeping  methods  which  falsified  cost 
of  construction  as  well  as  their  capitalization. 

D.  C.  Cloud  in  his  “Monopolies  and  the  People”  (pub¬ 
lished  in  1874)  says: 

“Their  balance  sheets  do  not  present  the  truth  in  any 
instance,  and  have  not  that  purpose,  being  only  an  exhibit 
that  will  apparently  justify  the  many  extortions  and  decep¬ 
tions  practiced  by  the  corporations.  The  actual  cost  of 
constructing  and  stocking  the  road  is  not  given ;  instead  we 
have  the  cost  as  represented  by  the  stocks  and  bonds  issued 
and  watered And  he  gives  many  examples  and  the  per¬ 
tinent  facts  and  figures. 

Senator  La  Follette  in  his  speech  before  the  Senate6  de¬ 
clared  that  the  Hepburn-Dolliver  Bill  “required  an  ac¬ 
counting  from  the  railroads  as  to  what  they  were  doing,  a 
uniform  system  of  bookkeeping,  so  that  the  Interstate  Com¬ 
merce  Commission  could  find  out  wdiether  they  were 
doctoring  their  reports  made  with  regard  to  these  various 
charges,  upon  which  rates  charged  the  public  were  based.” 

Senator  La  Follette  further  stated  that  year  after  year 
since  the  passing  of  the  Hepburn-Dolliver  Bill,  the  Com¬ 
mission  said  to  Congress:  “We  cannot  tell  whether  these 
maintenance  charges  are  honest  or  not.  The  system  of 
bookkeeping  is  such  that  we  are  all  at  sea  about  it.  We 
know  nothing  about  it,  and  the  railroads  may  be  taking  an 
undue  advantage  of  us.” 


6  February  21,  22,  1921.  Published  in  the  Congressional  Record. 
March  14,  1921. 


The  Railroads — An  Object  Lesson  115 
Just  One  “News”  Item 

“Washington,  Dec.  2. — Use  of  intercorporate  holdings  in 
figuring  rates  was  charged  against  the  railroad  corporations 
of  the  United  States  by  Frank  J.  Warne,  economist  for  the 
railroad  brotherhoods,  in  testimony  before  the  Senate  Inter¬ 
state  Commerce  Committee.  He  added  that  as  a  conse¬ 
quence  continuously  lower  returns  are  reported  by  the 
railroad  companies. 

“Mr.  Warne  said  that  the  capital  accounts  of  the  cor¬ 
porations  showed  investments  of  approximately  $5,213,- 
000,000  in  stocks  and  bonds  of  other  companies,  or  about  25 
per  cent  of  the  entire  outlay  claimed  as  transportation 
investment.  Such  investments,  he  asserted,  were  not  always 
governed  by  their  anticipated  revenue  production,  but  were 
made  for  the  purpose  of  controlling  or  influencing  man¬ 
agements. 

“The  intercorporate  holdings,  the  witness  said,  had  re¬ 
sulted  in  many  forms  of  evil  in  financing,  not  the  least  of 
these,  he  added,  being  the  deception  practiced  on  the  public 
in  the  corporation’s  efforts  to  show  poor  returns  on  the 
investments  as  a  whole. 

“Mr.  Warne  said  other  results  included  inflation  of 
property  investment,  overcapitalization,  involving  the  ex¬ 
cessive  issues  of  securities ;  speculation  with  corporate 
funds,  ‘reckless  and  profligate’  financing,  secret  and  con¬ 
fusing  bookkeeping,  manipulation  or  juggling  of  accounts 
and  falsification  of  records.”7 

Hut  why  waste  more  space  to  establish  the  fact  of  over- 
capitalization  since  it  proves  itself. 

The  Virtue  of  Persistency 

For  years  prior  to  the  war  the  railroad  executives  clam¬ 
ored  for  rate  increases.  For  years  they  argued  that  the 
rates  they  were  receiving  did  not  yield  them  a  big  enough 
income  on  the  ‘  ‘  amount  invested  ’  ’ ;  and  they  offered  a  won¬ 
derful  array  of  statistics  to  show  that  they  were  entitled 
to  a  much  higher  profit  on  their  “investment.”  In  1913, 


7  Chicago  Her  aid- Examiner ,  Commercial  Edition,  December  3,  1921. 


116 


The  New  Capitalism 


Samuel  Rea,  as  President  of  the  Pennsylvania  Railroad 
Company,  in  the  course  of  giving  his  testimony  before  the 
Interstate  Commerce  Commission  in  the  matter  of  increased 
freight  rates  said: 

“We  know  it  is  essential  for  us  to  maintain  adequate 
dividends  as  well  as  an  adequate  margin  over  the  dividends 
if  we  are  to  obtain  from  the  investing  public  the  capital 
needed  to  provide  the  additional  facilities  to  take  care  of 
the  usual  growth  of  traffic ;  and  we  must  have  some  leeway 
against  business  depressions,  which  occur  periodically,  and 
for  other  extraordinary  emergencies  that  may  arise.” 

All  Good  Things  Come  to  Those  Who  Wait 

The  war  was  a  windfall  for  the  railroads.  It  brought 
them  all  the  blessings  for  which  they  had  sighed  for  many 
years.  For  one  thing,  it  brought  them  a  goodly  sum  of 
money,  taken  directly  from  the  public  to  rehabilitate  their 
broken  down  properties ;  besides  the  Esch-Cummins  Bill,  to 
say  nothing  of  sundry  other  good  things.  But  alas !  their 
joy  was  not  unalloyed,  for  a  part  of  the  increased  revenue 
flowing  into  the  coffers  of  the  roads,  went  to  Labor,  and 
that  is  a  thing  not  even  to  be  dreamed  of  in  the  Capitalistic 
philosophy. 

Eliminating  Labor  from  the  Equation 

Even  before  the  Esch-Cummins  Bill  was  passed  the  rail¬ 
roads  opened  aggressive  war  on  Labor ;  for  it  is  no  part  of 
the  Capitalistic  scheme  that  those  who  labor  be  permitted 
to  enjoy  a  greater  measure  of  prosperity  than  is  sufficient 
to  enable  them  just  to  subsist.  The  benefits  accruing  to 
salaried  employees  from  the  Adamson  Law,  and  those  be¬ 
stowed  by  the  railroad  administration  and  the  Railway 
Wage  Commission  during  the  war  had  to  be  revoked  or 
nullified.  Toward  the  end  of  1920  a  nation-wide  campaign 
began  in  earnest.  Railroad  executives,  and  railroad  sta¬ 
tisticians  unloosed  a  flood  of  oratory,  press  literature  and 
an  avalanche  of  statistics,  all  calculated  to  show,  1 :  That 
railroad  employees  were  being  overpaid ;  and  2 :  that  unless 


The  Railroads — An  Object  Lesson  117 


all  of  the  revenue  provided  by  the  Esch-Cummins  law  could 
be  kept  in  the  hands  of  the  Wall  Street  crowd  the  rail¬ 
roads  and  the  country  would  surely  go  to  hell. 

On  January  31,  1921,  the  Railroad  Managers  met  in 
Chicago  for  the  specific  propaganda  purpose  of  excluding 
Labor  from  participation  in  any  share  of  the  Government 
award  under  the  Esch-Cummins  law.  At  the  opening  ses¬ 
sion  Mr.  W.  W.  Atterbury,  Chairman  of  the  Labor  Com¬ 
mittee  of  the  Railroad  Executives’  Association,  and  Vice 
President  of  the  Pennsylvania  lines,  demanded  immediate 
abrogation  of  the  war  time  wage  adjustment,  and  stated 
that  only  a  wage  cut  totalling  $500,000,000  a  year  can  pre¬ 
vent  a  panic.  The  Railroad  Managers  were  successful ;  the 
wage  reductions  they  demanded  were  allowed.  At  the  same 
time  the  railroads  announced  that  there  would  be  no  re¬ 
duction  in  freight  and  passenger  rates.  Perish  the  thought ! 

Railroad  Wage  Statistics 

The  statistics  with  regard  to  wages,  employed  in  the 
campaign,  are  particularly  interesting.  They  came  from 
a  dozen  different  directions,  but  all  from  one  source.  There 
is  a  deadly  similarity  about  them.  It  is  clear  that  the  rail¬ 
road  statisticians  all  drink  out  of  the  same  cup,  and  eat  out 
of  the  same  hand.  One  of  the  earliest  and  most  conspicuous 
of  the  statisticians  was  Samuel  O.  Dunn,  editor  of  Bailway 
Age. '  In  an  address  before  the  New  York  Railroad  Club 
(January  21,  1921)  he  explained  that  the  inability  of  the 
railroads  to  earn  the  return  expected  was  chiefly  due  to 
“the  enormous  payroll.”  “In  1914,”  he  said,  “the  railroads 
had  1,700,000  employees,  and  paid  them  $1,337,000,000.  In 
1917  they  had  about  the  same  number  of  employees  and 
paid  them  $1,740,000,000.  Today,  because  of  the  establish¬ 
ment  of  the  eight-hour  day  and  the  advance  in  wages  which 
has  been  granted,  they  have  about  1,950,000  employees  who 
are  being  paid  $3,600,000,000  a  year.” 


138 


The  New  Capitalism 


Accepting  Mr.  Dunn’s  figures  we  arrive  at  the  conclusion 
that  the  average  wage  per  railroad  employee 

In  1914  was  $  787  a  vear8 
In  1917  was  1024  a  year 
In  1919  was  1846  a  year 

Merely  to  sIioav  that  it  is  possible  to  arrive  at  different 
results  from  a  computation  of  the  same  statistics  I  give  the 
following  from  the  report  of  the  Railway  Wage  Commis¬ 
sion  according  to  which : 

“Fifty-one  percent  of  all  employees  during  December, 
1917,  received  $75  per  month  or  less,  80  percent  received 
$100  or  less;  that  even  among  locomotive  engineers  the 
majority  received  less  than  $170  per  month,  and  that  be¬ 
tween  the  grades  receiving  from  $150  to  $250  per  month 
there  was  less  than  3  percent  of  all  employees,  aggregating 
less  than  60,000  out  of  2,000,000. 

“One  hundred  and  eighty-one  thousand,  six  hundred 
and  ninety-three  men  received  between  $60  and  $65  per 
month;  312,761  received  from  $65  to  $75  per  month;  the 
average  pay  of  the  clerks  being  $56.77  per  month;  section- 
men  received  $50.31  per  month;  the  average  pay  of  un¬ 
skilled  labor  was  $58.25  per  month ;  station  service 
employees  averaged  $58.57 ;  freight  brakemen  and  flagmen 
averaged  $100.17 ;  and  passenger  brakemen  and  flagmen 
averaged  $91.10.”  The  report  adds: 

“These,  it  is  noted,  are  not  prewar  figures;  they  repre¬ 
sent  conditions  after  a  year  of  Avar,  and  two  years  of  rising 
prices.  And  each  dollar  now  represents  in  its  pOAver  to 
purchase  a  place  in  which  to  live,  food  to  eat,  and  clothing 
to  wear,  but  71  cents  as  against  the  100  cents  of  Jan¬ 
uary  1,  1918.” 


8  Slason  Thompson  said  in  1914  that  the  “average”  holdings  of 
the  railroad  stockholders  was  $15,000.  At  a  six  percent  dividend 
rate  the  “average”  railroad  stockholder,  giving  not  an  hour  of  his 
time  or  service  to  the  roads,  would  receive  as  his  reward  $900,  which 
is  $113  more  than  the  “average”  railroad  employee  received  as  wages 
for  a  year’s  work  in  1914. 


The  Railroads — An  Object  Lesson  119 


Cut — “From  Nearest  the  Heart” 

But  let  me  return  to  Mr.  Dunn’s  statements  and  sta¬ 
tistics.  He  insisted  that  operating  expenses  must  be  cut. 
But  note  you  well !  the  cutting  was  to  apply  to  only  one 
operating  item — labor;  although  it  would  be  much  easier 
to  cut  some  of  the  other  operating  items,  such  as  coal, 
materials  and  supplies,  particularly  since  the  same  financial 
group  that  controls  the  railroads  also  controls  coal,  and 
practically  all  materials  and  supplies  charged  against  rail¬ 
road  operating  expense — and  are  reaping  enormous  profits 
from  the  sale  of  their  own  commodities  to  themselves. 
Take,  for  example,  the  item  of  coal.  The  cost  of  locomotive 
fuel  in  1900  was  $90,593,965,  or  $475  per  mile  per  annum; 
whereas  in  1920  it  was  $672,891,964,  or  $2778  per  mile  per 
annum;  an  increase  of  $582,297,999,  or  an  increase  of 
$2303  per  mile — for  coal.  Increase  in  wages  does  not  ex¬ 
plain  this  enormous  increase  in  the  cost  of  fuel,  which  came 
from  the  mines  belonging  to  the  same  group  of  men  who 
also  own  the  railroads. 

Prank  Farrington,  head  of  the  Illinois  miners,  in  an 
address  (March  28,  1921)  said  that  the  railroads  consume 
one-third  of  the  soft  coal  output  and  do  not  pay  a  decent 
price  for  it,  leaving  the  public  to  stand  the  difference.  The 
railroads  are  given  coal  contracts  at  less  than  cost  of  pro¬ 
duction.9  If  the  facts  are  as  stated  by  Mr.  Farrington,  one 
wonders  how  the  railroads  explain  the  nearly  $600,000,000 
increase  in  their  coal  bill  over  former  prices. 

Parenthetically,  while  on  the  subject  of  coal,  it  may  be 
stated  here  that  the  average  freight  rate  for  coal,  before 
the  war,  was  about  $1.50  a  ton,  while  the  present  rate  is 
about  $3.00.  That  is  to  say,  the  public  is  paying  to  the 
railroads  $825,000,000  more  in  freight  cost  than  formerly. 
This  is  for  bituminous  coal  only.  I  have  not  gone  to  the 
trouble  of  looking  up  the  statistics  for  anthracite  coal.  In 
brief,  the  miners  get  about  $1.12  a  ton  for  mining  coal, 


9  See  Chicago  Tribune,  March  29,  1922. 


120 


The  New  Capitalism 


while  the  railroads  get  $3.00  a  ton  for  merely  hauling  it. 
There’s  something  wrong  somewhere.10 

A  Few  Pointed  Questions 

I  have  no  desire  to  argue  the  several  points  involved  in 
the  various  wage  controversies  going  on  at  present.  But  I 
will  say  that  when  Messrs.  Dunn,  Atterbury,  J.  DeWitt 
Cuyler,  Julius  Kruttschnitt,  Slason  Thompson,  et  al .,  try 
to  interpret  the  chronic  inability  of  the  railroads  to  make 
a  creditable  showing  by  the  present  high  cost  of  labor — 
wages — they  are  simply  stultifying  themselves.  Why  did 
not  the  railroads  make  a  better  showing  in  all  the  previous 
years  when  wages  were  considerably  lower  than  they  are 
at  present? 

Was  there  ever  a  time  when  the  railroads  made  money? 
If  the  railroads  did  not,  in  the  past,  and  are  not  now  mak¬ 
ing  any  money,  if  they  are  a  losing  venture,  as  many  of  the 
railroad  executives  would  have  us  believe,  how  will  you 
explain  the  dogged  tenacity  with  which  the  Capitalistic 
Wall  Street  group  clings  to  these  “unprofitable”  prop¬ 
erties?  W.  W.  Atterbury,  Chairman  of  the  Labor  Com¬ 
mittee  of  the  Railroad  Executives’  Association,  and  Vice 
President  of  the  Pennsylvania  lines,  on  January  31,  1921, 
publicly  stated  that  the  railroads  were  on  the  verge  of 
bankruptcy,  and  to  prove  that  he  spoke  the  truth  the 
Pennsylvania  railroad  lowered  its  dividend  rate  to  the 
stockholders  from  six  to  four  percent.11 

But  on  January  28,  1921,  only  three  days  before  Mr. 
Atterbury ’s  gloomy  address  in  which  he  emphasized  the 
serious  financial  condition  of  the  railroads,  his  road,  the 
Pennsylvania,  sold  a  $60,000,000  fifteen  year  6y2  percent 
bond  issue  within  an  hour’s  time.  The  issue  was  heavily 
oversubscribed.  I  find  it  difficult  to  explain  the  avidity 

10  President  Lewis,  of  the  mine  workers,  said,  March,  1921,  that 
the  average  income  of  the  miners  in  the  bituminous  field  in  1921  was 
only  about  $700.  Yet  in  October,  1921,  soft  coal  sold  for  $10.41. 
The  cost  of  labor  was  $1.97.  Who  gets  the  difference?  - 

11  Mr.  Atterbury  subsequently  repeated  his  statement  to  the  Penn¬ 
sylvania  employees  by  way  of  proving  to  them  that  they  must  accept 
lower  wages.  Receivership  stared  them  in  the  face,  he  told  them. 


The  Railroads — An  Object  Lesson  121 


with  which  Capitalistic  “investors”  subscribe  for  “secur¬ 
ities”  of  unstable  properties  in  a  business  that,  according 
to  Mr.  Atterbury  and  other  railroad  officials,  is  insolvent, 
and  whose  earnings  are  below  normal.  Incidentally,  it  may 
be  added  here  that  the  new  Pennsylvania  bonds  were 
promptly  admitted  to  trading  on  the  New  York  Stock 
Exchange. 

Only  a  few  more  questions  while  I  am  on  this  subject! 
Who  were  the  first  millionaires  in  the  United  States  ?  The 
Vanderbilts,  Goulds,  et  al.  And  how  did  they  build  up 
their  immense  fortunes  ?  Out  of  profits  made  from  railroad 
operation  and  stock  transactions.  Who  are  the  multi¬ 
millionaires  today?  The  Harrimans,  Hills,  Rockefellers, 
Morgans,  et  al.,  the  railroad  magnates — whose  aggregate 
wealth — a  goodly  portion  of  which  came  from  railroad 
profits  and  stock  operations — runs  into  the  billions. 

No!  it  isn’t  difficult  to  understand  why  some  of  the  rail¬ 
roads  out  of  which  a  small  group  of  insiders  have  made 
immense  fortunes,  are  bankrupt,  or  on  the  verge  of  bank¬ 
ruptcy.12  The  reason  is  not  far  to  seek.  Read  the  history 
of  the  railroads  in  the  United  States.  Sold  out  from  one 
to  three  times  a  year  for  the  past  fifty  years,  on  the  Stock 
Exchange,  each  time  at  a  tremendous  profit  to  a  small  group 
of  manipulators!  Stockholders  unhesitatingly  frozen  out, 
bond  holders  cheated,  properties  wrecked,  property  ac¬ 
counts  juggled — to  say  nothing  of  the  shameful  transactions 
revealed  by  Court  inquiries  into  such  roads  as  the  Rock 
Island,  New  Haven,  and  other  roads. 

The  “Widows  and  Orphans' '  in  the  Lion's  Ben 

We  have  been  told  that  there  are  about  600,000  stock¬ 
holders  in  the  first  class  roads,  and  that  there  are  many 
“widows  and  orphans”  among  them,  but  we  are  not  told 

12  However  near  to  “bankruptcy”  some  of  the  roads  are  may  be 
judged 'from  the  following  item  which  appeared  in  the  Chicago  Journal 
of  Commerce ,  March  1,  1920.  “Washington,  Feb.  28  (Special). — The 
Chicago,  Burlington  and  Quincy  Railroad  Company  was  today  granted 
permission  to  issue  $60,000,000  capital  stock  as  a  stock  dividend  to 
be  paid  out  of  surplus  earnings.”  This  is  only  one  of  many  similar 
“news”  items. 


122 


The  New  Capitalism 


that  the  report  of  the  Interstate  Commerce  Commission  of 
March  25,  1919,  shows  that  the  majority  of  the  stock  in 
each  one  of  these  roads,  and  their  subsidiaries,  is  held  by 
fewer  than  twenty  of  the  big  stockholders  in  each  road. 
Nor  has  any  statistician  for  the  railroads  ever  pointed  out 
that  the  largest  part  of  the  six  percent  return  guaranteed 
by  the  Esch-Cummins  law,  amounting  to  over  a  billion  dol¬ 
lars,  will  go  to  the  big  stockholders — a  few  thousand  in 
number.  The  bona  fide  small  stockholder,  if  he  will  be  bene¬ 
fited  at  all  by  the  distribution,  will  share  in  only  a  small 
part  of  it,  for  it  can  be  clearly  showrn  that  the  small  investor 
is  always  the  goat.  Scant  consideration  is  extended  him 
either  by  the  railroads,  or  any  of  the  corporations  in  whose 
securities  he  has,  in  good  faith,  invested.  A  few  of  the 
most  recent  occurrences  will  at  least  give  color  to  my  asser¬ 
tion  with  regard  to  the  small  stockholders  in  railroad,  and 
other,  securities. 

In  the  first  place  there  has  been  a  terrific  fall  in  the 
market  price  of  railroad  stocks  (and  all  corporation  stocks). 
This  means  a  terrific  shrinkage  in  the  value  of  the  holdings- 
of  small  investors — a  loss  which  means  a  great  deal  to 
them.  For  example :  ‘  ‘  The  preferred  stock  of  the  Chicago, 
Milwaukee  and  St.  Paul  Company  was  sold  to  the  public 
by  the  Company  years  ago  at  par,  $100  per  share.  Divi¬ 
dends  have  been  suspended  upon  it,  and  the  stock  is  chang¬ 
ing  hands  in  the  market  under  $40  per  share.”13  (A  loss 
of  $60  a  share.) 

Before  the  war  the  Pennsylvania  Railroad,  considered 
one  of  the  most  substantial  roads,  was  paying  six  percent. 
In  1921  the  dividend  rate  was  reduced  to  four  percent. 
Needless  to  say  the  market  price  of  the  stock  declined. 

Slason  Thompson,  director  of  the  Bureau  of  Railway 
News  and  Statistics,  is  authority  for  the  statement  that  for 
the  past  quarter  of  a  century  the  dividend  rate  on  all 
railroad  stocks  “has  not  averaged  three  percent.”14 

13  Monthly  letter  of  The  National  City  Bank  (New  York),  Novem¬ 
ber,  1921. 

14  “Statistics  of  American  Railways,  1914.” 


The  Railroads — An  Object  Lesson  123 


Let  the  bona  fide  small  investors  take  note  of  this :  the 
dividend  rate  on  their  holdings  has  not  averaged  three  per¬ 
cent.  And  when  we  take  into  consideration  the  losses  they 
have  sustained  during  the  last  quarter  of  a  century  through 
the  fall  of  market  values  of  their  holdings,  even  the  less 
than  three  percent  dividend  is  wiped  out  of  existence.  The 
financial  writer  who  recently  said  “Many  railroads  turn 
out  to  be  poor  investments”  told  a  bitter  truth. 

While  on  the  subject  of  the  small  investor  in  railroad 
securities,  the  following,  by  B.  C.  Forbes,  another  financial 
writer,  is  of  interest  here : 

“When  the  late  J.  P.  Morgan  was  indicted,  along  with 
Charles  S.  Mellen,  in  connection  with  certain  New  Haven- 
Grand  Trunk  Railway  maneuvers,  he  took  to  bed  absolutely 
inconsolable.  When,  several  years  later,  William  Rocke¬ 
feller  was  indicted,  along  with  other  New  ITaven  directors, 
he  confided  to  me  one  day,  in  very  grave  tones,  that  it  was 
not  comfortable  to  be  under  indictment  and  to  have  the 
possibility  of  a  prison  sentence  hanging  over  one. 

“These  indictments  are  recalled  to  mind  -by  the  suit 
brought  by  a  protective  committee  of  Denver  &  Rio  Grande 
Railroad  stockholders  against  men  who  were  directors  of  the 
road.  The  stockholder’s  committee  petitions  the  Supreme 
Court  to  compel  the  directors  to  account  for  $200,000,000 
alleged  to  have  been  lost  through  stock  manipulation,  con¬ 
spiracy,  collusion  and  forced  and  fictitious  sales  of  railroad 
property. 

“It  is  probably  well  to  have  this  whole  Denver  &  Rio 
Grande-Western  Pacific  matter  cleared  up  to  the  satisfac¬ 
tion  of  all  parties.  While  the  standard  and  character  of 
the  men  sued  made  it  hard  to  believe  for  a  moment  that 
they  would  have  laid  themselves  open  to  the  charges  made, 
nevertheless  the  losses  sustaind  by  Denver  &  Rio  Grande 
security  holders  have  been  so  heavy  that  intense  bitterness 
and  suspicion  have  been  created. 

“the  first  purchase  of  securities  I  ever  made  was  ten 
shares  of  Denver  &  Rio  Grande  preferred  stock.  I  paid 
about  $800  for  it.  I  sold  it  for  about  $100.  Naturally,  like 


124 


The  New  Capitalism 


other  stockholders,  I  had  a  feeling  that  the  Denver  &  Rio 
Grande  got  the  thin  end  of  the  stick  in  its  dealings  with 
Western  Pacific,  which  virtually  gobbled  up  the  whole 
property. 

“If  the  suggestion  of  taint  attaches  to  the  Denver  &  Rio 
Grande  directors  they  ought  to  welcome  the  receipt  of  a 
clean  bill  of  health  from  the  Supreme  Court.  On  the  other 
hand — well,  let  the  law  take  its  course.”15 

The  bona  fide  small  investor  who  flatters  himself  that  he 
is  a  beneficiary  of  the  Capitalistic  System  would  do  well  to 
wake  up  out  of  his  dream. 

An  Interlude 

If  any  one  imagines  that  the  railroads,  even  though  they 
succeed  in  materially  bringing  down  wages  of  all  railroad 
employees,  will  be  content  with  the  resultant  increase  in 
revenue  or  profit,  let  him  disabuse  his  mind  of  any  such 
imaginings.  Let  him  remember  that  since  1907  the  Inter¬ 
state  Commerce  Commission  has  permitted  an  addition  of 
seven  billion  dollars  to  the  property  investment  account  of 
the  roads,  although  the  mileage  increased  only  by  about 
24,000  miles — about  nine  percent  increase  in  mileage. 

But  read  on!  Walker  D.  Hines,  former  director  general 
of  railroads,  declared  before  the  Senate  Interstate  Com¬ 
merce  Commission  that  the  American  railroads  must  spend 
more  than  one  billion  dollars  a  year  in  property  improve¬ 
ments  for  years  to  come.  Mr.  Hines  expressed  opposition 
to  changes  in  the  transportation  act  on  the  grounds  that 
such  alterations  would  destroy  possibilities  of  betterment 
by  the  railroads.  From  Mr.  Hines’  statement  we  can  log¬ 
ically  conclude  two  things:  First,  that  the  railroads  have 
no  intention  to  reduce  freight  and  passenger  rates  even 
after  their  “liquidation  of  wages”  is  completed;  and  sec¬ 
ondly,  that  the  “property  account”  of  the  railroads  will 
be  increased  for  years  to  come  at  the  rate  of  a  billion  dollars 
a  year.  Increase  of  property  account  is,  after  all,  simply 


15  B.  C.  Forbes  in  the  Chicago  Herald-Examiner,  March  28,  1921. 


The  Railroads — An  Object  Lesson  125 


a  matter  of  bookkeeping,  rather  than  of  actual  investment. 

But  that  is  not  all!  S.  Davies  Warfield,  President  of 
the  National  Association  of  Owners  of  Railroad  Securities 
(a  rather  big  title)  stated  before  the  same  committee  that 
a  less  return  than  that  provided  by  the  Esch-Cummins  law 
would  not  maintain  transportation.  ‘  ‘  The  question  for  the 
moment  is,”  said  Mr.  Warfield,  “can  sufficient  revenue  be 
attained  from  rates  and  fares  that  will  be  considered  rea¬ 
sonable  by  the  public  and  the  shippers,  or  will  part  of  the 
money  have  to  be  supplied  by  taxation ?” 

Prom  these,  and  many  other  statements  made  by  railroad 
executives  and  representatives  it  is  clear  what  is  going  on 
in  the  Capitalistic  mind.  The  Government — that  is  the 
public — has  already  been  compelled  to  supply  more  than 
a  billion  dollars  to  bolster  up  the  railroad  properties,  and 
if  all  the  “claims”  presented  are  allowed,  probably  an¬ 
other  billion  of  the  public's  hard  earned  money  will  have 
been  poured  into  the  coffers  of  the  roads. 

I  have  listened  to  eloquent  denunciations  of  the  Adamson 
law,  which,  it  cannot  be  denied,  was  favorable  to  railroad 
employees,  if  you  consider  a  law  that  grants  a  wage  more 
nearly  commensurate  with  living  costs  as  a  special  favor. 
I  have  heard  and  read  bitter  attacks  upon  the  Railway 
Wage  Board  and  the  Railroad  Administration  during  the 
war.  But  not  one  word  of  criticism  had  the  speakers  and 
writers  to  make  against  those  whose  wrong  doings  and  mis¬ 
deeds  are  written  in  many  railroad  hearings,  investigations 
and  Court  records;  not  a  syllable  of  reprobation  against 
those  who,  through  sundry  methods  of  exploitation  of 
Labor  and  the  public  (as  well  as  the  small  investors)  have 
augmented  their  fortunes;  not  a  whisper  of  condemnation 
against  those  whose  mismanagement  is  responsible  for  the 
wretched  condition  of  the  properties  entrusted  to  their  care, 
and  to  rehabilitate  which  a  heavy  burden  of  taxes  has  been 
placed  upon  our  shoulders. 

I  do  not  understand  the  temper  of  a  public  that  will 
allow  itself  to  be  fleeced  without  so  much  as  a  peep  of  pro¬ 
test.  And  yet  the  past  deeds  and  future  designs  of  the 


126 


The  New  Capitalism 

railroads  are  “like  glass;  the  very  sun  shines  through 
them.  ’  ’ 

But  the  Railroad  Executives  Are  Right! 

When  the  railroad  executives  contend  that  they  cannot 
pay  decent  wages  and  also  pay  themselves  huge  sums  as 
dividends  on  stock  and  interest  on  bonds — they  are  right, 
absolutely  and  demonstrably  right.  It  is  impossible  for  any 
business,  whatever  its  character,  to  pay  dividends  and  inter¬ 
est  on  an  excessively  inflated  valuation.  It  cannot  be  done 
longer  than  for  a  period  of  about  twenty  years ;  after  which 
the  system  is  bound  to  break  down.  It  can  be  carried  on 
for  a  longer  period  only  on  one  condition,  and  that  is  that 
the  money  necessary  to  pay  dividends  on  non-existing  cap¬ 
ital  be  extorted  from  the  general  public  bjr  simply  ruinous 
rates  or  prices.  In  this  regard,  however,  the  railroads  are 
handicapped.  They  cannot  continue  to  raise  freight  and 
passenger  rates  indefinitely.  There  is  a  limit  beyond  which 
it  is  impossible  to  go.  If  freight  rates  become  too  exor¬ 
bitant  it  reacts  on  the  volume  of  freight  traffic,  and  auto¬ 
matically  reduces  the  volume  of  revenue.  If  passenger 
rates  are  raised  to  a  point  that  the  public  considers  exces¬ 
sive,  it  automatically  checks  travel,  and  this,  in  time,  seri¬ 
ously  affects  the  roads’  revenue.  And  so  it  is  not  difficult  to 
understand  the  unwillingness  of  the  railroads  to  pay  decent 
wages  to  the  employees,  as  it  is  only  by  cutting  wages  and 
keeping  freight  and  passenger  rates  exorbitant  that  they 
can  pay  themselves  dividends  on  their  watered  stock  and 
interest  on  their  bonds.  The  public  must  pay,  the  wage 
earner  must  pay,  and  the  small  investor  must  pay. 

The  Conclusion 

AVliat  is  the  real  purpose  of  this  chapter  ?  Simply  this — 
to  go  on  record  as  saying  that  what  has  happened  to  the 
overcapitalized  railroads  in  the  United  States  is  going  to 
happen  to  every  overcapitalized  industry  or  business  of 
whatever  kind.  It  is  inevitable!  Any  corporation  whose 
securities  issues,  based  on  inflated  valuation,  are  greatly  in 


The  Railroads — An  Object  Lesson  127 


excess  of  actual  assets;  any  industry  that  rewards  capital 
that  doesn’t  exist,  is  hound,  ultimately,  to  end  in  disaster. 
Through  the  device  of  lower  wages  and  higher  prices  the 
Capitalistic  group  may  succeed  for  a  while  longer  to  delay 
the  day  of  reckoning ;  but  it  cannot  avert  the  disaster.  And 
in  every  instance  the  wage  earners — the  non-investor  group, 
the  public,  must  pay  the  whole  bill. 


CHAPTER  XIT 
The  Stock  Market 

I  AM  aware  that  the  stock  market,  or  Stock  Exchange,  is 
considered  by  many  as  an  essential  institution.  With¬ 
out  a  stock  market,  we  have  been  told,  industry  would 
languish,  investments  could  not  be  made,  etc.,  and  that 
taking  it  all  in  all  the  world  could  not  very  well  get  on 
without  it — no  progress  could  be  made. 

Originally  the  Stock  Exchange  might  be  said  to  have  had 
legitimate  functions  and  served  a  legitimate  purpose.  “In 
their  origin  Stock  Exchanges  appear  to  have  been  free  to 
the  use  of  anyone  who  wished  to  buy  and  sell,  and  it  was 
probably  with  this  function  in  view  that  some  of  the  older 
exchanges,  notably  the  Paris  Bourse,  were  located  in  build¬ 
ings  erected  at  the  public  expense.”1 

But  the  stock  exchange  of  today  lias  departed  both 
from  the  original  intent  and  purpose.  Its  conservative 
character  of  a  public  convenience  has  degenerated  into  a 
madly  speculative  game  for  the  immediate  and  ultimate 
benefit  of  a  select  coterie  of  Financial  potentates  and  Cap¬ 
italistic  wizards.  Membership  in  a  modern  Stock  Exchange 
is  “regarded  very  valuable,  those  in  New  York  having  been 
quoted  as  high  as  $97,000  in  the  most  prosperous  times.”2 

The  first  book  I  read,  about  thirty  years  ago,  on  the  sub¬ 
ject  of  the  Stock  Exchange  and  stock  transactions  was 
entitled  “Ten  Years  in  Wall  Street.”  I  can’t  recall  the 
author’s  name.  The  stock  transactions  were  then  confined 
almost  exclusively  to  rail  and  transportation  stocks.  The 
industrials  had  not  yet  developed  into  marketable  securities. 
Books  of  more  recent  date,  such  as  “The  Stock  Exchange 

i  “The  New  International  Encyclopedia,”  Vol.  XVIII,'  p.  579. 

2  “Monetary  and  Banking-  Systems,”  by  Maurice  L.  Muhleman,  L.E.M. 

128 


The  Stock  Market 


128 


from  Within,”  by  W.  C.  Van  Antwerp;  ‘  ‘The  Work  of 
Wall  Street,”  by  Sereno  S.  Pratt,  and  “The  Stock  Mar¬ 
ket,”  by  S.  S.  Hnebner,  Ph.D.,  give  a  fair  idea  into  what 
kind  of  an  institution  the  stock  market  has  developed,  or 
degenerated. 

Were  it  my  particular  design  to  expatiate  on  the  chi¬ 
canery  of  the  stock  market,  and  to  expostulate  on  its  utter 
depravity,  nothing  would  better  serve  the  purpose  than  to 
quote  liberally  from  some  of  the  books  written  in  defense 
of  and  by  way  of  apology  for  the  stock  market.  But  since 
moralizing  is  foreign  to  my  present  plan  I  will  not  concern 
myself  with  aught  that  has  not  a  direct  bearing  on  the  sub¬ 
ject  under  discussion. 

Shearing  the  Lambs  in  the  Shambles 

Why  do  I  write  of  the  stock  market  and  its  transactions 
at  all  ?  For  very  definite  reasons,  which  I  shall  state  briefly. 
For  one  thing  I  want  to  emphasize  that  the  stock  market 
and  all  its  transactions  are  for  the  enrichment  of  a  small 
group.  Authorities  differ  as  to  the  number  of  investors. 
The  latest  estimate  is  by  Professor  Huebner,  who  claims 
that  “exclusive  of  the  numerous  holders  of  Government 
bonds,  there  are  probably  4,000,000  persons  who  are  share¬ 
holders  and  bondholders  in  American  corporations.” 

Accepting  his  estimate  it  is  to  be  noted  here  that  many 
of  these  1  ‘  investors,  ’  ’  and  for  whom  financial  writers  evince 
such  tender  solicitude,  are  mere  lambs,  invariably  coming 
out  of  the  pit  bleeding,  gored  by  the  bulls  and  clawed  by 
the  bears — while  the  inner  circle  of  Capitalistic  stock 
market  gamblers  and  manipulators  ultimately  reap  what¬ 
ever  profits  are  derived  from  the  buying  and  selling  of 
stocks. 

G.  C.  Selden,  in  an  article  entitled  “The  Machinery  of 
Wall  Street:  Why  It  Exists,  How  It  Works,  and  What  It 
Accomplishes,  ’  ’  says : 

‘  ‘  Small  investors,  even  though  they  may  be  very  numer¬ 
ous,  do  not  usually  have  much  influence  on  the  immediate 
movements  of  prices.  The  main  contest  is  between  the  big 


130 


The  New  Capitalism 


investors — who  might  as  well  be  called  speculators,  except 
that  they  can  always  command  money  or  credit  enough  to 
pay  for  their  stock  in  full  if  necessary — and  the  other  class 
of  speculators,  who  will  take  a  loss  if  the  market  goes 
against  them  far  enough.”3 

Playing  the  Market  on  Margin 

Briefly  the  bona  fide  small  investor  is  not  a  conspicuous 
figure  in  the  stock  market.  He  buys  stocks,  of  course,  and 
sells  whenever  the  opportunity  offers,  at  a  profit.  The 
important  thing  to  remember  is  that  the  bona  fide  small 
investor  pays  the  full  market  price  for  his  stock.  How¬ 
ever,  all  the  purchases  and  sales,  by  and  on  behalf  of  small 
investors,  in  the  aggregate  are  a  bagatelle  when  compared 
with  the  marginal  stock  transactions.  It  has  been  said  that 
90  percent  of  all  stock  transactions  are  of  a  speculative 
character.  That  is  to  say,  options  on  large  blocks  of  stock 
are  bought  on  margin.  The  speculator  “puts  up”  let  us 
say,  a  ten-point  margin — that  is  to  say,  ten  percent  of  the 
value  of  the  stock.  If  he  sells  before  the  ten  points  are  ex¬ 
hausted  he  makes  a  profit.  If,  on  the  other  hand,  the  market 
falls  below  ten  points,  and  he  is  unable  to  put  up  another 
margin  to  protect  his  option,  he  loses.  It  is  by  this  practice 
that  “fortunes”  are  made  and  lost. 

The  Principle  Set  Forth 

Let  us  try  to  understand  the  principle  underlying 
gambling  in  stocks  on  margin.  John  Smith  (let  us  call 
him) — may  his  tribe  decrease! — let  us  say  has  a  thousand 
dollars  which  he  puts  up  as  a  ten-point  margin  in  the 
month  of  January  of  a  given  calendar  year,  for  an  option 
on  a  ten  thousand  dollar  block  of  stock.  If  the  stock  rises 
ten  points  within  the  next  few  days,  and  he  sells  at  the 
right  time,  he  disposes  of  the  ten  thousand  dollar  block  of 
stock,  in  which  he  never  had  more  than  a  tenth  part  inter- 


3  The  Magazine  of  Wall  Street,  November  25,  1916. 


The  Stock  Market 


131 


est,  at  a  clear  profit  of  one  thousand  dollars — that  is  to  say, 
he  has  doubled  his  one  thousand  dollars. 

If  he  repeats  his  transaction  for  twelve  consecutive 
months — and  let  us,  furthermore — in  order  to  simplify  the 
illustration  of  the  principle  involved — say  that  he  never 
puts  up  more  than  a  thousand  dollars  as  margin,  his  reward 
at  the  end  of  twelve  months  will  be  as  follows : 

Original  “capital”  $1000.  Putting  this  up  as  a  ten 
percent  margin  he  will  have  “purchased”  a  ten  percent 
equity  in  a  $10,000  block  of  stock.  Since  we  are  assuming 
a  monthly  re-investment  of  the  original  $1000  he  has  pur¬ 
chased  $120,000  worth  of  stock,  although  he  never  pos¬ 
sessed  more  than  $1000  actual  money,  and  made  a  total  of 
$12,000  in  the  twelve  months.4 

What  entitles  John  Smith  to  such  a  profit?  Is  it  his 
shrewdness,  his  sagacity,  his  thrift,  his  economy,  or  is  it  his 
industry  that  is  being  rewarded  ?  It  is  none  of  these.  He 
simply  had  the  ‘  ‘  courage  ’  ’  to  risk  his  $1000,  make  or  lose  ; 
he  took  a  chance;  he  gambled.  He  is  not  entitled  to  any 
such  reward.  He  has  done  absolutely  nothing ;  he  has  con¬ 
tributed  nothing  to  society,  nothing  to  the  welfare  of  the 
public.  Why,  then,  should  he  be  rewarded?  Why  indeed? 
He  has  not  helped,  nor  given  his  service  to  the  industry,  or 
industries,  in  whose  stocks  he  gambled. 

I  need  hardly  waste  any  time  in  stating  what  is  known 
to  nearly  everybody,  that  no  mere  uninitiated  “investor” 
of  the  piker  variety  would  ever  be  permitted  so  easily  and 
so  successfully  to  play  the  market.  That  is  not  the  way  the 
game  is  played.  I  merely  want  to  illustrate  the  principle 
upon  which  the  stock  market  is  operated. 

Now  let  us  assume  a  fall  in  the  market,  and  consequently 
the  ten-point  margin  would  not  be  sufficient.  Another  ten 
percent  margin  will  be  necessary.  To  protect  himself  and 
his  “investment”  John  Smith  borrows  from  the  bank  or 
banker :  that  is  to  say,  John  Smith  borrows  your  money  and 
mine  (our  savings)  with  which  to  speculate  in  stocks.  Bil- 

4  And  if  he  were  to  pyramid  his  “winning's”  he  would  make  hun¬ 
dreds  of  thousands  out  of  his  original  $1000. 


132 


The  New  Capitalism 


lions  are  borrowed  every  year  for  speculative  purposes  on 
the  Stock  Exchange.  These  loans  to  speculators  are  known 
as  “call  loans/’ 

Thanks  to  the  Capitalistic  System  of  speculating  on  mar¬ 
gin,  John  Smith  can  make  a  fortune;  though  of  course  he 
also  runs  the  risk  of  losing  the  money  he  has  or  has  bor¬ 
rowed,  and  of  going  broke.  The  real  winners,  ultimately  in 
the  stock  gambling  game  are  the  inner  circle5  composed  of 
a  few  thousand  men  who  manipulate  the  market  and  win 
whether  it  goes  up  or  down. 


Business  Is  Not  Directly  Benefited 

This  chapter  is  taking  me  further  afield  than  I  had  in¬ 
tended  to  go.  Certainly  I  had  not  intended  to  write  at  any 
length  of  stock  transactions,  operations,  manipulations,  etc. 
My  purpose  in  writing  this  chapter  was  really  to  say  that 
none  of  the  stock  transactions  are  for  the  benefit  of  business 
itself.  Not  any  of  the  money  won  in  the  speculative  stock 
market  enters  directly  and  ipso  facto  into  the  channels  of 
productive  industry.  The  transaction  is  between  individ¬ 
uals — one  buyer  and  one  seller.  Whatever  money  passes 
between  them  is  from  pocket  to  pocket ;  not  from  pocket  to 
the  corporation’s  treasury. 

The  Public,  Is  Not  Benefited 

Furthermore,  all  the  stock  transactions  are  not  of  the 
slightest  benefit  to  the  eighty  million  non-investors.  The 
eighty  million  derive  not  a  solitary  advantage  from  all  the 
stock  sales;  just  the  reverse,  for  I  think  I  can  put  it  down 
as  an  axiom  that  not  a  dollar  of  profit  is  ever  made  by  any¬ 
one  in  the  stock  market  or  elsewhere  but  the  profit  comes 
from  somewhere;  and  that  “somewhere”  is  generally  the 
non-investor’s  pocket-book.  In  the  end  the  non-investor 


5  I  have  been  told  by  one  who  knows  the  game  that  the  real  inner 
circle  is  composed  of  only  about  100  men — who  constitute  a  syndicate. 


The  Stock  Market 


133 


group6  must  pay  the  total  bill  of  all  stock  winnings.  If  the 
non-investor  group  does  not  pay,  then  tell  me  from  what 
source  the  winnings  in  the  stock  market  are  derived. 

Why,  some  will  say,  * 1 A  certain  number  win  and  a  certain 
number  lose :  just  as  in  a  poker  game,  a  certain  amount  of 
money  is  put  into  the  game  by  a  certain  number  of  players. 
At  the  end  of  the  game  the  same  amount  of  money  is  there 
— only  it  has  changed  hands.7’  Precisely!  just  as  in  a 
poker  game !  But  sirs !  there  are  no  marginal  transactions 
in  a  poker  game;  the  players  do  not  put  up  ten  cents  on 
the  dollar;  neither  do  they  borrow  from  the  players  nor 
from  the  innocent  bystander — not  unless  the  rules  have 
been  changed  recently.  Nor  do  they  expect  the  general 
public  to  make  good  their  losses. 

Who  Is  Benefited ? 

If  the  winnings  of  the  lucky  ones  in  the  stock  market 
are  not  derived  from  the  general  public ;  if,  as  some  will 
probably  assert,  the  winnings  of  a  certain  number  are  the 
losses  of  a  certain  number — then  every  point  I  have  scored 
in  this  chapter  stands  admitted.  And  the  condemnation  of 
the  stock  market  is  eminently  fitting.  A  few  of  the  four 
million  “investors,”  beyond  a  doubt,  are  greatly  benefited 
by  stock  speculation,  but  neither  business,  nor  the  general 
public,  is  directly  benefited. 

IIoiv  One  Billion  Can  Grow  Into  Billions 

Now  let  us  assume  for  the  present  that  a  given  num¬ 
ber  of  professional  gamblers  go  into  the  stock  market  with 
a  certain  amount  of  money — let  us  say  one  billion  dollars — 
and  that  this  amount  is  both  lost  and  won  in  the  course  of 
twelve  months.  Consequently  it  is  still  in  the  game  at  the 
end  of  the  year,  with  this  difference,  that  it  has  been  placed 
to  the  credit  of  the  winners  on  the  books  of  banks ;  and  the 

9 

6  The  bona  fide  small  investor  also  helps  to  pay  the  bill.  “Managers, 

when  successful  in  operations  on  the  Exchange,  have  pocketed  the 
profits,  but  when  unsuccessful,  have  thrown  the  loss  on  the  stock¬ 
holders,”  says  Ernest  Von  Halle  in  “Trusts  or  Industrial  Combinations 
in  the  United  States.” 


134 


The  New  Capitalism 


losers  have  been  eliminated  from  the  game.  So  far  so  good ! 
The  following  year  this  same  amount  of  money  will  again 
be  used  by  the  winners;  and  let  us  say  that  they  continue 
to  win  at  the  maximum  rate.  Here ’s  the  principle : 

Within  ten  years  there  will  have  been  credited  to  sundry 
persons  winnings  aggregating  billions  of  dollars,  although 
only  one  billion  of  money  wTas  actually  entered  in  the  game. 

Who  can  tell  me  how  much  actual  cash  is  put  into  the 
stock  gambling  game  in  the  course  of  a  year  ?  Who  can  tell 
me  how  much  credit  (call  loans)  is  employed  therein?  Who 
can  tell  me  how  much  is  lost  and  how  much  is  “made”? 
Who  can  tell  me  what  proportion  of  the  winnings  each  year 
is  taken  out  of  the  game  and  placed  to  the  credit  of  indi¬ 
viduals  in  banks?  If  I  had  these  and  a  few  other  relevant 
data  I  should  like  to  have,  I  could,  by  simple  arithmetic, 
prove  the  damnable  character  of  the  stock  market ;  and  the 
mystery  of  inflated  fortunes,  and  inflated  bank  accounts 
would  dissolve  into  thin  air. 

The  Big  Game  Played  in  a  Big  Way 

The  stock  transactions  on  the  New  York  Stock  Exchange 
for  the  year  1920,  was  223,084,035  shares.  Computing  each 
share  at  par  value7  the  stock  transactions  for  the  year  1920 
involved  $22,308,403,500.  This  covers  only  the  stocks  of 
those  corporations  listed  on  the  New  York  Stock  Exchange 
— about  1000.  It  does  not  include  the  transactions  for  the 
same  group  of  stock  on  the  exchanges  of  other  cities,8  or 
stocks  traded  on  the  New  York  Curb  Market.  It  is  esti¬ 
mated  that  the  annual  sales  on  the  Curb  average  about 
60,000,000  shares ;  while  those  of  the  exchanges  outside  of 
New  York  aggregated  about  35,000,000  shares  in  1920. 

There  is  no  way  of  arriving  at  definite  figures  as  regards 
the  amount  of  money  actually  involved  in  all  stock  transac¬ 
tions  in  the  course  of  twelve  months  in  the  United  States. 

7  The  par  value  of  most  listed  stocks  is  $100.  Those  whose  par 
value  is  less  than  $100  are  only  a  small  percentage  of  the  total. 

8  Boston,  Philadelphia,  Chicago,  Baltimore,  Pittsburgh,  Washington, 
Detroit,  Cleveland,  Cincinnati,  New  Orleans,  Los  Angeles,  and  San 
Francisco. 


The  Stock  Market 


135 


In  the  first  place,  the  New  York  Stock  Exchange — the 
biggest  business  institution  in  the  United  States — certainly 
doing  the  greatest  volume  of  business — keeps  no  books,  i.e., 
officially;  nor  does  it  publish  official  reports  or  statements. 

Moreover  the  fluctuation  in  market  quotations,  the  rise 
and  fall  of  prices  of  stocks,  make  it  difficult  even  to  ap¬ 
proximate.  However  from  the  unofficial  data  that  we  have 
it  is  safe  to  say  that  in  normal  times  from  twenty-five  to 
thirty-five  billions  of  dollars  change  hands  on  the  various 
stock  Exchanges  every  year. 

And  this  is  only  for  stocks.  The  bond  transactions  are 
comparatively  small  in  volume.  In  1920,  for  example,  the 
bond  sales  on  the  New  York  Stock  Exchange  amounted  to 
$3,955,036,400;  whereas  in  1918  they  amounted  to  only 
about  two  billion.  The  reason  for  this  is  that  bonds  are  of 
a  less  speculative  character — and  that  cash,  rather  than 
margins,  enter  into  their  purchase  and  sale. 

Capitalistic  Anachronisms 

Out  of  the  welter  of  chicanery  apparent  in  the  specu¬ 
lative  stock  game,  two  things  stand  out  clear  and  strong: 
First:  the  speculative  investor  is  not  a  stockowner  in  any 
sense  of  the  word.  They  merely  hold  an  option  on  stock 
for  a  few  days,  weeks  or  months.  They  are  mere  transients, 
not  permanent  members  of  a  company.  They  have  no  per¬ 
sonal  or  vital  interest  in  the  business  itself;  its  manage¬ 
ment,  its  conduct,  or  its  affairs.  Their  chief  concern  is  in 
the  “earning  power”  as  it  is  reflected  in  the  market  quo¬ 
tations. 

The  average  marginal  speculative  stockholder  cannot  be 
said  to  be  an  integral  part  of  a  corporation.  Generally 
speaking  I  will  say  that  a  majority  of  the  speculative  stock¬ 
holders  in  a  given  corporation  on  January  first  of  a  cal¬ 
endar  year,  are  not  stockholders  in  said  corporation  at  the 
end  of  the  year,  particularly  if  there  is  a  decline  in  the 
market  quotations.  Here  we  have  a  condition  that  gives 
neither  solidity  nor  responsibility  to  the  existing  corpora¬ 
tions.  It  means  perpetual  changing  of  /leadership;  it  is 


136 


The  New  Capitalism 


erroneous  to  speak  of  ownership  when  there  is  none.  The 
group  of  “speculative  investors,”  or  temporary  stock- 
holders,  rotates.  The  speculative  investor  flits  from  flower 
to  flower,  tarrying  longest  where  there  is  the  most  honey — 
the  most  likely  prospect  of  a  sightly  profit  from  the  pur¬ 
chase,  or  sale,  of  stock.  The  average  speculative  investor, 
or  stockholder  shifts  from  corporation  to  corporation — I 
will  not  say  that  he  transfers  his  loyalty,  for  he  has  no 
loyalty — sticking  to  one  or  the  other  as  long  as  all’s  well — 
and  deserting  it  as  soon  as  difficulties  arise  or  adversity  sets 
in.  The  average  speculative  marginal  investor  is  a  coward 
- — an  adept  at  scuttling  a  ship. 

The  second  anachronism  is  that  hundreds  of  corporations 
are  sold  over  and  over  in  the  course  of  every  twelve  months. 
This  is  particularly  true  of  the  corporations  whose  stocks 
are  listed  on  the  New  York  Stock  Exchange.  Let  me 
give  you  just  one  illustration.  The  United  States  Steel 
Corporation  has  outstanding  $360,281,100  preferred  stock, 
and  $508,302,500  common  stock — consequently  a  total  of 
$868,583,600.  During  the  year  1920  the  sales  of  the  United 
States  Steel  Corporation  stock  on  the  New  York  Stock 
Exchange  alone,  amounted  to  13,585,300  shares  of  the  com¬ 
mon  stock  and  224,200  preferred.  Since  the  par  value  of 
the  United  States  Steel  Corporation  stock  is  $100,  the  stock 
transactions  involved  $1,380,950,000,  which  is  an  amount 
considerably  greater  than  its  outstanding  issue. 

The  Case  Clearly  Stated 

The  following  excerpts  from  the  speech  of  Hon.  Albert 
B.  Cummins,  in  the  Senate,  Monday,  September  1,  1913,  on 
a  bill  to  reduce  tariff  duties  and  provide  revenue  for  the 
Government  and  for  other  purposes,  are  worth  reading,  in 
that  they  are  the  utterances  of  a  man  considered  an  author¬ 
ity  on  the  subject.  Said  Senator  Cummins: 

“I  take,  as  an  illustration,  the  year  1912.  The  dealings 
upon  the  exchange  were  less  that^year  than  the  year  before, 
and  therefore  it  is  entirely  fair  to  take  the  year  1912. 

“In  that  year  there  were  sold  upon  the  exchange  in 


The  Stock  Market 


137 


New  York,  bonds — and  I  am  giving  the  bonds  simply  for 
the  purpose  of  instituting  a  comparison — amounting  in  the 
aggregate  to  $653,497,000.  I  want  Senators  to  remember 
the  small,  meager  amount  of  bonds  sold  upon  the  New  York 
Stock  Exchange  when  I  come  to  state  the  amount  of  stock 
sold  in  the  same  market  during  the  same  time. 

“In  the  year  1912  there  were  sold  on  the  exchange  in 
New  York,  63,704,779  shares  of  railway  stocks  alone.  The 
par  value  of  the  stock  so  sold  was  $5,052,823,900.  Of  in¬ 
dustrial  and  miscellaneous  stocks  there  were  sold  upon  the 
exchange,  in  the  year,  72,413,946  shares  of  the  par  value  of 
$6,150,899,600.  Of  all  stocks  there  were  sold  136,118,725 
shares,  with  an  aggregate  par  value  of  $11,203,723,500. 

“I  pause  here  to  point  out  the  fact  that  the  aggregate 
value  of  the  railroad  stocks  sold  or  pretended  to  be  sold 
during  that  year  upon  the  exchange,  amounted  to  about 
four-fifths,  or  certainly  more  than  three-fourths  of  all  the 
railroad  stocks  of  the  United  States.  All  the  railroad 
stocks  are  not  listed  upon  the  New  York  Exchange;  but  the 
aggregate  stocks,  common  as  ivell  as  preferred,  of  all  the 
railway  companies  of  this  country,  does  not  greatly  exceed 
$7,500,000,000.  I  state  it  in  round  numbers.  Of  the  stocks 
listed  upon  the  New  York  Stock  Exchange  there  were  sold 
during  that  year  $5,052,823,900. 

“It  goes  without  saying  that  90  percent  of  these  sales 
were  purely  speculative.  Certainly  not  more  than  10  per¬ 
cent  of  the  stocks  of  the  railroad  companies  of  this  country 
actually  changed  hands  during  the  year  1912,  and  yet  three- 
fourths  of  those  stocks  were  nominally  sold  upon  the  New 
York  Exchange  alone . 

“We  might  as  well  face  the  question  whether  we  intend 
to  enter  upon  a  campaign  against  selling  short  in  this 
country.  I  believe  it  is  as  serious  a  menace  to  industrial 
stability  and  financial  strength  as  is  now  before  the  Amer¬ 
ican  people.  Some  time  we  must  take  up  in  earnest  the 
problem  of  suppressing  these  gigantic  gambling  transac¬ 
tions,  and  I  think  this  is  the  time  to  do  it.  My  amendment 
demands  that  we  do  it  now.  .  .  . 


138 


The  New  Capitalism 


“There  are  a  great  many  people  who  believe  that  the 
short  sale — that  is,  the  sale  of  a  commodity  or  a  product  or 
a  stock  by  a  man  who  does  not  own  it,  but  who  expects  to 
go  into  the  market  when  the  time  for  delivery  comes  and 
either  settle  upon  the  market  price  as  it  then  is  or  buy  at 
the  market  price  the  thing  he  has  sold,  in  order  to  make 
delivery — is  a  valuable  element  in  the  business  of  the 
United  States.  It  has  been  so  argued  for  a  long,  long  time. 
I  do  not  think  so.  It  is  said  that  short  sales  are  necessary 
to  create  a  market  for  things  that  people  actually  want  to 
sell,  and  in  order  to  insure  a  condition  which  will  enable  a 
man  to  sell  anything,  the  moment  he  wants  to  sell  it,  at  the 
market  price.  I  do  not  think  so.  When  one  has  a  thing 
that  somebody  else  wants  to  buy,  there  will  always  be  an 
opportunity  for  the  seller  and  the  buyer  to  meet.  .  .  . 

“But  as  it  is  now,  it  is  not  a  place  for  the  transfer  of 
actual  shares.  It  is  a  place  where  bold  and  experienced 
men  balance  their  wits.  It  is  a  place  in  which  men  of  great 
mental  capacity  and  audacity  as  well,  fight  for  supremacy, 
employing,  not  alone  the  means  which  ought  to  influence 
the  price  of  stocks,  but  every  means  which  may  tend  to 
affect  the  market.  .  .  . 

With  Regard  to  Railroads 

“In  1912  the  Atchison,  Topeka  &  Santa  Fe  Railroad  Co. 
had  listed  on  the  New  York  Stock  Exchange  its  common 
stock.  It  amounted  to  $168,430,500.  At  the  end  of  the 
year,  as  we  are  assured  by  those  who  know  something  of 
the  subject,  practically  the  same  persons  owned  the  stock 
who  owned  it  at  the  beginning  of  the  year ;  and  yet  during 
the  course  of  the  year  the  stock  of  this  company  to  the 
amount  of  $129,319,700  was  sold  and  bought  upon  the  New 
York  Stock  Exchange  alone.  .  .  . 

“The  Chicago,  Milwaukee  &  St.  Paul  Railroad  Company’s 
.  .  .  entire  common  stock  amounted  to  $116,348,200; 

but  during  this  year  there  were  sold  and  bought  on  the 
New  York  Stock  Exchange  stock  of  this  company  to  the 
amount  of  $149,277,200.  At  the  end  of  the  year  practically 


The  Stock  Market 


139 


the  same  persons  owned  the  stock  that  owned  it  at  the 
beginning  of  the  year;  and  the  fluctuations  in  the  market 
price,  steady  and  permanent  as  it  ought  to  be,  ran  from 
117%  to  99%. 

“How  many  fortunes  were  wrecked  in  that  fluctuation  it 
is  impossible  for  me  to  say.  There  was  no  material  differ¬ 
ence  in  the  actual  value  of  the  stock  during  that  year.  It 
was  just  as  certain  to  pay  dividends  at  one  time  as  at 
another.  The  future  of  the  country  remained  the  same. 
The  business  at  its  command  continued  without  great 
change  or  variation.  Yet  during  the  course  of  the  year,  up 
and  down,  under  the  influence  of  these  speculators  who 
sought  nothing  else  than  their  own  advancement,  and  their 
own  profit,  this  stock  varied  from  117%  to  99%. 

“Again,  the  Erie  Railroad  Co.  had  outstanding  that  year 
$112,378,900  of  stock,  but  there  were  sold  on  this  exchange 
shares  aggregating  $245,033,100 — almost  two  and  a  half 
times  in  the  one  year  the  aggregate  value  of  all  the  stock 
of  the  company. 

“The  Canadian  Pacific,  another  company  which  is  en¬ 
gaged  in  legitimate  railroad  business,  whose  earnings  do  not 
change  very  greatly,  had  listed  upon  this  stock  exchange 
stock  of  the  aggregate  value  of  $180,000,000.  During  the 
year  there  were  traded  in  shares  of  the  value  of  $159,- 
693,800,  and  the  market  price  of  the  stock  ranged  from 
226,  the  low  point,  to  283,  the  high  point,  without  any 
reason  whatsoever  for  the  fluctuation. 

“The  Great  Northern,  another  rather  steady  property 
when  it  escapes  from  the  hands  of  those  who  desire  to 
manipulate  its  fortunes  for  their  private  interest,  had  listed 
$209,981,875  of  stock:  and  there  passed  back  and  forth,  in 
this  fictitious  and  unreal  way  which  is  known  in  no  other 
business  in  the  world  except  that  which  is  done  upon  such 
an  exchange,  shares  of  the  value  of  $119,236,700. 

“The  Lehigh  Valley  is  a  road  that  has  seemed  to  be  the 
favorite  of  these  speculators  in  New  York,  although  it  is  a 
railroad  doing  a  most  legitimate  business  and  supplying  a 
service  that  must  continue  without  essential  change.  Its 


140 


The  New  Capitalism 


stock  amounted  to  $60,501,700,  yet  men  pretended  to  buy 
and  sell  upon  the  exchange  during  this  year,  $175,625,000, 
and  its  market  price  ranged  from  155%  to  185%. 

“The  Missouri  Pacific  had  $83,251,085  of  stock.  Some¬ 
body  bought  and  sold  on  the  exchange  $113,320,800  of  it 
without  any  real  change  of  ownership,  and  it  fluctuated 
from  35,  the  low  point,  to  47%,  the  high  point. 

“The  Northern  Pacific,  with  $248,000,000  of  stock,  saw 
its  shares  bought  and  sold  to  the  extent  of  $151,551,800. 

“The  Reading,  another  of  these  great  composite  rail¬ 
roads,  well  established,  doing  a  business  which  must  con¬ 
tinue  so  long  as  the  people  of  this  country  do  any  business 
at  all — and  I  beg,  now,  that  Senators  will  especially  remem¬ 
ber  this — had  a  capital  stock  of  $70,000,000.  Yet  these  peo¬ 
ple  in  New  York,  for  themselves  or  for  these  blind  and 
inexperienced  men  who  seek  to  find  a  fortune  where  for¬ 
tunes  are  not  to  be  found,  sold,  and  somebody  bought. 
$1,114,468,250  of  its  stock.  In  other  words,  all  its  capital 
stock  was  bought  and  sold  more  than  fifteen  times  during 
the  course  of  the  year. 

“The  Southern  Pacific  had  stock1  to  the  amount  of 
$272,672,405,  and  of  its  stock  there  was  sold  during  the 
year  $129,139,400. 

“Of  the  common  stock  of  the  Union  Pacific  there  was 
outstanding  $216,627,800.  There  was  bought  and  sold  dur¬ 
ing  that  year  $1,062,600,000,  and  the  range  of  market  value 
was  from  150%  to  176% . 

“The  speculators,  of  course,  like  stocks  that  are  easily 
depressed  and  easily  increased  in  price . 

And  Here  Are  a  Few  Industrials 

“But  I  now  turn  to  another  kind  of  stock.  I  call  them 
industrial  or  miscellaneous  stocks.  The  first  one  that  I 
mention  is  Amalgamated  Copper ;  known  to  every  man  who 
has  any  interest  in  what  takes  place  among  the  great  specu¬ 
lators  of  the  country.  Its  stock  amounts  to  $153,887,930. 
It  was  traded  in  during  1912  to  the  extent  of  $812,869,500. 
I  doubt  exceedingly  whether  at  the  close  of  the  year  there 


The  Stock  Market 


141 


was  any  substantial  difference  in  the  ownership  of  the 
stock  as  compared  with  the  beginning  of  the  year.  The 
lowest  price  was  60,  the  highest  price  92%,  a  range  of  32% 
per  cent,  or  one-third  of  the  par  value  of  the  shares  them¬ 
selves. 

“The  American  Beet  Sugar  Co.,  of  which  we  have  heard 
a  great  deal  in  recent  years,  had  a  common  capital  stock  to 
the  value  of  $15,000,000.  There  were  sold  and  bought  on 
this  exchange  during  the  year  shares  of  this  company  to 
the  aggregate  value  of  $108,612,400,  more  than  seven  times 
the  entire  amount  that  had  been  issued  by  the  company. 

“The  American  Can  Co.,  another  company  out  of  which 
great  fortunes  have  come,  had  stock  of  the  par  value  of 
$41,233,300,  and  yet  there  were  sold  on  the  exchange  dur¬ 
ing  the  year  shares  amounting  to  $379,658,300,  quite  nine 
times  the  value  of  all  the  stock  then  outstanding. 

“The  Stock  of  the  American  Smelting  and  Refining  Co., 
another  institution  which  has  been  utilized  for  winning 
great  fortunes,  was  $65,000,000,  and  of  that  $15,000,000 
had  been  withdrawn  and  deposited  to  secure  certain  bonds, 
and  therefore  really  it  had  outstanding  but  $50,000,000. 
Yet  the  trading  in  this  stock  amounted  during  the  year  to 
$227,741,000.  Its  low  point  was  66%,  its  high  point  91. 

“The  General  Electric  Co.  had  $77,325,200  of  stock.  The 
trading  amounted  to  $50,551,000. 

“The  United  States  Steel  Corporation,  the  greatest  in¬ 
dustrial  organization  of  the  time,  or  of  any  other  time  iff 
this  or  any  other  country,  had  outstanding  common  stock 
of  the  par  value  of  $508,302,500,  and  yet  somebody  sold 
and  somebody  bought  during  the  course  of  the  year,  shares 
of  this  stock  amounting  to  $2,462,622,400.  The  low  point 
was  58%,  the  high  point  80%.  ” 

The  Capitalistic  Corollary 

Why,  and  for  whose  benefit,  are  these  stocks  bought  and 
sold  year  after  year?  The  non-investors,  i.  e .,  the  public, 
derives  no  benefit  whatever.  Are  the  industries  benefited 
thereby,  or  only  a  certain  number  of  individuals  within  the 


142 


The  New  Capitalism 


so-called  “ investor’ ’  group?  The  answer  is  obvious.  Tre¬ 
mendous  as  are  the  profits  derived  by  the  chief  owners  of 
the  big  corporations,  whether  from  operation  of  railroads 
or  public  utilities,  etc.,  or  from  the  manufacture  and  sale 
of  industrial  products,  the  profits  they  derive  from  their 
stock  transactions  and  manipulations  (to  say  nothing  of 
interest,  dividends,  and  commissions)  are  probably  greater. 

There  are  many  other  things  besides  stocks  in  which  the 
gambler  speculates — scores  of  staple  commodities,  wheat, 
corn,  rye,  barley,  oats,  petroleum,  cotton,  butter,  eggs,  etc., 
and  various  kinds  of  produce.  Besides  real  estate,  the  re¬ 
peated  buying  and  selling  of  which  (and  a  sightly  profit  on 
each  “turn  over”  to  the  speculator)  has  given  us  inflated 
“values”  and  higher  rents.  The  same  principle  that  gov¬ 
erns  the  stock  market  controls  the  speculative  market  what¬ 
ever  the  commodities  may  be.  The  marginal  speculator 
takes  his  profit  (needless  to  say  there  are  also  sometimes 
losses)  or  inflated  returns,  out  of  the  price  fluctuations, 
while  the  consumer,  i.  e.,  the  public,  pays  the  bill. 

The  Period  to  This  Chapter 

What  prostitution  is  to  society,  that  is  what  the  stock 
market  is  to  legitimate  business — with  this  difference — that 
houses  of  prostitution  were  once  tolerated  as  the  less  of 
two  evils — whereas  the  stock  market,  in  spite  of  its  flagrant 
immoralities,  boasts  of  being  an  institution  upon  which  the 
salvation  of  the  nation  depends. 

Society  has  never  accepted  prostitution  as  an  honorable 
business;  nor  have  those  practising  the  profession  ever 
sought  to  paint  the  halo  of  holiness  around  their  transac¬ 
tions.  But  Capital  has  forced  society  to  accept  the  stock 
market  as  if  it  were  an  honorable  and  sacred  institution; 
besides  placing  at  the  disposal  of  those  who  ply  their  ne¬ 
farious  trade  within  its  purlieus,  the  nation’s  financial 
resources — that  is  to  say,  the  people’s  money— the  savings 
of  the  non-investors. 


CHAPTER  XIII 
Our  National  Wealth 


PROFESSOR  WALKER  in  his  “Political  Economy” 
says:  “Economists  have  found  much  difficulty  in  de¬ 
fining  wealth;  and  not  a  few  writers,  especially  of 
late,  have  chosen  to  abandon  the  word  altogether.” 

Notwithstanding  Professor  Walker’s  statement  that  not 
a  few  waiters  have  abandoned  the  word  wealth,  our  eco¬ 
nomic  literature  has  become  cluttered  with  more  or  less 
erudite  definitions  of,  and  elaborate  treatises  on  wealth,  its 
nature,  distribution,  etc.  These  various  definitions  and 
treatises  are  often  in  conflict  with  each  other,  for  the  rea¬ 
son  that  the  writers  are  not  in  agreement  with  regard  to 
the  fundamentals  involved. 

The  Best  Definition  of  “Wealth” 

While  it  may  be  difficult  for  Capitalistic  economists  to 
arrive  at  a  crystallized  definition  of  wealth,  the  man  in 
the  street  finds  it  less  puzzling  to  determine  what  wealth 
is  when  applied  to  himself.  He  takes  an  invetory  of  all  he 
owns  and  owes,  and  the  difference  between  the  two  is  his 
wealth.  Therefore,  wealth,  in  the  popular  mind,  is  some¬ 
thing  measureable,  something  computable,  something  that 
can  be  reduced  to  figures.  The  average  man  may  not  be 
able  to  give  a  scientific  definition  of  the  word  wealth,  but 
most  of  us  do  not  find  it  at  all  difficult  to  compute  how 
much  or  how  little  of  it  we  have. 

The  very  best  definition  of  wealth  I  have  ever  heard — the 
simplest  and,  I  will  add,  the  most  scientific  definition,  came 
froip  the  lips  of  an  expert  accountant.  “Wealth,”  he  said, 
‘  ‘  is  the  difference  between  assets  and  liabilities.  ”  It  is  this 
definition  that  will  guide  me  in  the  writing  of  this  chapter. 


143 


144 


Tlie  New  Capitalism 


Statistics  on  the  Wealth  of  the  United  States 

What  is  the  wealth  of  the  United  States  today?  The 
Census  Bureau  has  published  no  official  estimate  nor  sta¬ 
tistics  since  1912.  Nevertheless,  in  1917,  after  our  entrance 
into  tiie  war,  the  then  Secretary  of  the  Treasury,  William 
G.  McAdoo,  said  our  national  wealth  was  255  billions.1 
The  latest  estimate  for  1920  is  288  billion.  It  goes  without 
saying  that  both  of  these  estimates  are  pure  guess  wTork, 
and  probably  grossly  exaggerated.  But  for  the  present  we 
will  accept  them  for  what  they  are  worth.  With  the  esti¬ 
mates  for  1917  and  1920,  added  to  those  for  1900,  1904 
and  1912,  published  in  the  1921  United  States  Census  Re¬ 
port,  we  can  at  least  get  an  approximate  idea,  if  not  of  the 
actual  wealth  at  least  of  the  supposed  growth  of  wealth  in 
the  United  States  : 


1900 . $88,517,306,775 

1904 . 107,104,211,917 

1912 . 187,739,071,090 

1917 . 255,000,000,000 

1920 . 288, 464, 000, 0002 


Growth  of  the  National  Wealth 

Carlyle  has  said  somewhere :  “A  judicious  man  looks  at 
statistics  not  to  get  knowdedge,  but  to  save  himself  from 
having  ignorance  foisted  on  him.”  In  this  spirit  let  us 
examine  the  statistics  with  regard  to  the  increase  in  our 
national  wealth. 

During  the  century  from  1800  up  to  the  year  1900  the 
wealth  of  the  United  States  grew  to  88  billion  dollars;  or 
at  an  average  rate  of  about  880  million  dollars  a  year. 

From  1900  to  1920  our  wealth,  according  to  the  statistics 
before  us,  grew  from  88  billion  dollars  to  288  billion  dollars 
— an  increase  of  approximately  200  billion  dollars  within 

1  In  1912  when  our  National  Wealth  was  declared  to  be  187  billion, 
the  assessment  valuation  was  sixty-nine  and  a  half  billion.  In  1917 
the  National  Wealth  was  estimated  by  Mr.  McAdoo  at  255  billion; 
the  assessment  valuation  was  only  88  billion. 

2  The  Journal  of  Finance  and  Commerce  in  May,  1920,  said  the 
National  Wealth  was  500  billion,  an  absurdity  on  the  face  of  it. 


Our  National  Wealth 


145 


twenty  years,  or  at  the  rate  of  about  10  billion  a  year. 

How  is  it  possible  for  the  wealth  of  a  nation  to  increase 
so  suddenly,  so  rapidly,  so  tremendously  ?  There  is  but  one 
answer.  It  isn’t  possible,  and  it  didn’t  happen!  No  such 
growth  in  wealth  could  have  been  brought  about  by  any 
known  process  of  healthy  development ;  no  such  tremendous 
yearly  increase  could  have  been  produced  by  legitimate 
means. 

One  Hundred  Billion — Sheer  Inflation 

What,  then,  is  the  explanation?  The  explanation  is 
simple  enough.  You  will  please  observe  that  the  tremen¬ 
dous  increase  in  our  national  wealth  began  approximately 
in  1900,  i.  e.,  the  same  year  that  overcapitalization  began 
to  assume  gigantic  proportions.  Much  of  the  increased  vol¬ 
ume  of  the  “wealth”  which  the  nation  is  supposed  to  pos¬ 
sess,  is  sheer  inflation.  There  are  no  commensurate  assets. 
The  tremendous  increase  is  for  the  most  part  fanciful ;  the' 
colossal  increment  in  wealth  is  fictitious.  If  I  were  asked 
to  make  a  guess  as  to  the  probable  amount  of  our  national 
wealth  I  would  say  that  it  does  not  exceed  188  billion.  But 
I  consider  even  that  amount  too  high,  for  I  do  not  believe 
that  our  average  yearly  legitimate  increase  since  1900  was 
at  the  average  rate  of  five  billion  a  year.  But  judge  for 
yourself. 

According  to  the  United  States  Census  (Statistical  Ab¬ 
stract,  1921)  the  national  wealth  in  1880  was  $43,642,- 
000,000,  and  in  1890  it  was  $65,037,000,000 — an  average 
increase  of  $2,139,500,000  a  year.  By  1895  the  national 
wealth  had  risen  to  $77,000,000,000,  an  average  increase  of 
$2,400,000,000  a  year.  By  1900  it  had  mounted  to  $88,- 
517,000,000,  which  was  at  the  rate  of  about  $2,750,000,000 
a  year.  From  1900  to  1904  the  increase  was  at  the  rate  of 
about  $4,600,000,000 ;  from  1904  to  1912  at  the  tremendous 
rate  of  about  ten  billion  a  year;  and  from  1912  to  1920  at 
the  rate  of  about  twelve  and  a  half  billion  a  year. 

To  admit,  therefore,  a  possible  yearly  increase  of  five 
billion  dollars  during  the  past  twenty  years — a  total  of  100 


146 


The  New  Capitalism 


“National  Wealth”  Statistics  from  the  U.  S.  Census 
Statistical  Abstract,  1921 

National  Wealth;  Estimated  under  Specified  Heads  in  1900, 

1904  and  1912 

(Source:  Reports  of  the  Bureau  of  Census,  Department  of  Commerce) 


Form  of  wealth 


Gold  and  silver  coin 

and  bullion  . 

Manufacturing  mach  ’y 

tools,  etc . 

Railroads  and  their 
equipments  . 

Total 

Street  Railways,  Etc.: 

Street  Railways  . 

Telegraph  Systems  . .  . 
Telephone  (Systems  .  . 
Pullman  &  private  cars 
Shipping  and  Canals.  . 
Irrigation  Enterprises . 
Privately  owned 

waterworks  . 

Privately  owned  central 
electric  light  and 
power  stations . 

Total 
All  Other: 


Clothing  and  personal 

Ornaments  . . 

Furniture,  carriages, 
etc . 

Total 

Grand  total 


1900 
Dollars 
46,324,839,234 
6,212,788,930 
3,306,473,278 
'  749,775,970 

1904 

Dollars 

55,510,247,564 

6,831,244,570 

4,073,791,736 

844,989,863 

1912 

Dollars 

98,362,813,569 

12,313,519,502 

6,238,388,985 

1,368,224,548 

1,677,379,825 

1,998,603,303 

2,616,642,734 

2,541,046,639 

3,297,754,180 

6,091,451,274 

9,035,732,000 

11,244,752,000 

16,148,532,502 

69,848,035,876 

83,801,383,216 

143,139,573,144 

1,576,197,160 
211,650,000 
400,324,000 
\  98,836,600 

537,849,478 

2,219,966,000 

227,400,000 

585,840,000 

123,000,000 

846,489,804 

4,596,563,292 

223,252,516 

1,081,433,227 

123,362,701 

1,491,117,193 

360,865,270 

290,000,000 

267,752,468 

275,000,000 

402,618,653 

562,851,105 

2,098,613,122 

3,495,228,359 

4,840,546,909 

10,265,207,321 

1,455,069,323 
s  6,087,151,108 
'424,970,592 
326,851,517 

1,899,379,652 

7,409,291,668 

495,543,685 

408,066,787 

5,240,019,651 

14,693,861,489 

826,632,467 

815,552,233 

2,000,000,000 

2,500,000,000 

4,295,008,593 

4,880,000,000 

5,750,000,000 

8,463,216,222 

15,174,042,540 

18,462,281,792. 

34,334,290,655 

88,517,306,775 

107,104,211,917 

187,739,071,090 

*  Including  live  stock  on  farms  and  ranges  and  in  cities  and  towns. 


Our  National  Wealth 


147 


billion,  is  certainly  liberal.  Therefore  I  consider  my  esti¬ 
mate  that  our  national  wealth  does  not  exceed  188  billion 
as  extremely  fair.  In  brief,  I  maintain  that  since  1900  over 
100  billion  dollars  of  fictitious  “wealth”  has  been  included 
in  all  statistics  pertaining  to  our  “National  Wealth.” 

If  I  am  correct  in  saying  that  the  national  wealth  is  100 
billion  inflation,  then  the  general  public  is  paying  about 
$6,000,000,000  a  year  interest  on  this  inflated,  non-exist¬ 
ing  wealth.  If  I  am  correct  in  saying  that  the  inflation  in 
our  national  wealth  is  100  billion,  then  the  Capitalistic 
System  has  placed  a  debt  of  $5,000  upon  every  family,  the 
annual  interest  on  wrhich  amounts  to  $300  per  family. 

There  will  be  those,  of  course,  who  will  challenge  my 
statement  that  100  billion  dollars  of  our  statistical  national 
wealth  is  sheer  inflation.  They  will  say  that  I  am  in  error. 
Let  them  prove  it!  They  cannot  deny  that  there  is  con¬ 
siderable  inflation.  If  they  accuse  me  of  exaggeration  as 
regards  the  amount  of  inflation  I  wish  to  say  that  I  shall 
gladly  revise  my  estimates  on  condition  that  they  will  fur¬ 
nish  me  with  complete  and  absolutely  correct  data  showing 
contrary  conditions.  Until  the  proof  of  my  error  is  forth¬ 
coming,  my  guess  and  estimate  must  stand.  My  guesses  and 
my  estimates  are  fully  as  valuable  as  the  guesses  and  esti¬ 
mates  of  any  other  writer  on  economic  subjects. 

However,  for  the  purpose  of  this  chapter  I  am  willing  to 
accept  the  official  statistics  for  our  “National  Wealth,” 
just  as  they  are,  without  making  any  deduction  for  infla¬ 
tion.  But  I  will  ask  you  to  remember  the  expert  account¬ 
ant’s  definition  of  wealth,  viz.,  “the  difference  between  as¬ 
sets  and  liabilities.” 

The  National  Assets 

What  do  the  statistics  or  estimates  (see  opposite  page) 
of '  our  national  wealth  cover?  Wealth  or  assets?  I  hold 
that  they  cover  assets  only.  As  proof  I  single  out  the  item 
“Railroads.”  In  1912  the  wealth  of  the  “railroads  and 
their  equipment”  is  given  as  $16,148,532,502.  But  where 


148 


The  New  Capitalism 


do  we  find  mention  of  the  liabilities  of  the  railroads?  The 
railroad  properties  are  bonded  (i.  e.,  mortgaged)  for  over 
ten  billion,  which  means  that  the  railroad  properties  are 
hypothecated  for  approximately  two-thirds  of  their  esti¬ 
mated  value. 

Thus  I  could  take  item  for  item  and  show  that  the  sta¬ 
tistics  for  our  national  wealth  are,  to  put  it  mildly,  irrele¬ 
vant  and  misleading.  I  ask  every  business  man  who  reads 
this  chapter  whether  in  all  his  life  he  has  ever  seen  a  trial 
balance  in  which  only  assets  are  given,  and  no  mention 
whatever  is  made  of  liabilities.  AVhat  would  he  think  of 
an  accountant  who  made  a  glowing  report  of  the  wealth 
represented  by  his  assets,  without  saying  at  least  something 
of  the  debts  that  must  be  paid — the  liabilities. 

The  National  Liabilities 

I  have  no  intention  of  pursuing  this  phase  of  the  subject 
to  the  bitter  end.  To  do  so  in  any  worth-while  fashion 
would  require  a  considerable  amount  of  space.  But  merely 
to  indicate  the  possibilities  let  me  ask:  What  are  the  Na¬ 
tional  Liabilities?  For  surely  you  will  not  deny  that  there 
are  liabilities.  Look  over  the  trial  balance  of  any  corpora¬ 
tion  and  you  will  see  that  there  are  liabilities  scheduled 
which  cut  rather  alarmingly  into  the  assets.  (While  on 
this  subject,  and  merely  in  passing,  I  have  always  won¬ 
dered  why  “ Capital  Stock” — AVhich  is  presumably  the 
amount  of  capital  a  given  number  of  persons  constituting 
a  corporation  ‘  ‘  invested  ’  ’  for  the  acquisition  of  their  assets , 
such  as  land,  buildings,  machinery,  equipment,  etc. — should 
also  be  their  liability.  A  contradiction  is  involved  here. 
But  let  us  return  to  our  subject.) 

The  national  assets  in  1920  amounted  presumably  to  288 
billion.  Remember  that;  then  read  the  following: 

“Debts  of  the  Government,  of  states,  cities,  counties, 
school  districts,  improvement  districts,  transportation  cor¬ 
porations,  all  industrial  corporations,  private  mortgages 
and  bank  loans,  amount  to  more  than  $150,000,000,000, 


Our  National  Wealth 


149 


approximately  $1,500  for  every  man,  woman  and  child  in 
the  United  States.  Figures  by  Richardson.”3 

The  Trial  Balance 

“  Wealth  is  the  difference  between  assets  and  liabilities,” 
said  the  expert  accountant.  Which  being  the  case  we  ar¬ 
rive  at  the  conclusion  that  the  national  wealth  is  only 
$138,000,000,000.  Here  are  the  figures  : 

National  Assets  . $288,000,000,000 

National  Liabilities  .  150,000,000,000 


National  Wealth . $138,000,000,000 

The  Public  Pays  the  Interest  and  Principal 

It  is  of  tremendous  importance  to  keep  the  liabilities 
in  mind,  for,  according  to  the  Capitalistic  logic  the  non¬ 
investors  will  have  to  pay  the  interest  as  well  as  liquidate 
the  principal  of  the  entire  debt.  The  national  liabilities 
are  estimated  as  150  billion.  This  means  that  the  public 
is  paying  not  less  than  six  percent,  or  a  total  of  9  billion 
dollars  a  year  interest  on  this  debt.  And  if  the  practice  of 
setting  up  a  sinking  fund  to  ultimately  cancel  the  principal 
of  the  debt  is  general,  then  the  public  is  paying  consider¬ 
ably  more  than  9  billion  a  year.  I  do  not  know  within 
what  period  of  time  this  liability  will  be  liquidated;  some 
note  and  bond  issues  run  to  A.  D.  1956,  and  some  even  be¬ 
yond  that  year.  But  let  us  assume  that  the  liabilities  will 
not  be  increased;  and  that  the  entire  debt  (liabilities)  will 
be  paid  off  promptly  at  the  end  of  twenty  years.4  In  that 
case  the  public  will  have  paid  as  interest,  180  billion  dol¬ 
lars;  and  by  way  of  liquidating  the  principle  of  the  debt 
150  billion  dollars ;  or  a  total  of  330  billion  dollars. 

3  Frederick  R.  Burch  in  The  Dearborn  Independent ,  Jan.  28,  1922. 

4  It  is  an  absolute  certainty  that  twenty  years  hence  the  National 
liability  will  be  considerably  greater  than  150  billion.  I  have  already 
shown  that  maturing-  securities  are  not  “retired”  ;  on  the  contrary, 
they  are  being  perpetuated.  We  have  seen  that  for  every  dollar  of 
maturing  securities,  nine  dollars  of  new  securities  are  issued.  Conse¬ 
quently  when  I  “assume”  the  cancellation  of  the  150  billion  national 
liabilities  at  the  end  of  twenty  years,  I’m  dealing  in  a  pure  hypothesis. 


150 


The  New  Capitalism 


Putting  the  case  into  the  simplest  form,  the  national 
liabilities,  amounting  at  present  to  150  billion  dollars, 
means  that  a  debt  of  $7,500  has  been  placed  on  every  fam¬ 
ily,  and  the  interest  alone  on  which  amounts  to  at  least 
$450  per  family. 

Getting  to  the  Point 

But  let  me  return  to  the  point  of  my  subject — the  Na¬ 
tional  Wealth.  “Wealth  is  the  difference  between  assets 
and  liabilities.”  If  a  piece  of  property  valued  at  ten  thou¬ 
sand  dollars,  and  of  which  I  am  presumably  the  owner,  is 
mortgaged  for  $8000,  what  is  the  amount  of  my  wealth? 
Answer:  $2000!  Correct! 

But,  you  will  say :  Nevertheless  there  is  $10,000  worth 
of  property  in  existence.  Quite  true !  but  it  isn ’t  mine ;  I 
have  no  title  to  it;  it  is  encumbered — there  are  notes  and 
mortgages  amounting  to  $8000  against  it,  on  which  I  am 
compelled  to  pay  interest.  My  equity  is  $2000.  Those  to 
whom  I  owe  $8000 — those  who  hold  the  notes  and  mort¬ 
gages,  have  the  other  $8000.  They — not  I — own  the  wealth 
I  am  supposed  to  have. 

Now  we  are  getting  into  the  very  heart  of  our  subject, 
and  I  am  going  to  make  a  statement  of  tremendous  fact; 
a  statement  that  is  incontrovertible ;  a  statement  susceptible 
of  proof ;  a  statement  based  upon  examination  and  analysis 
of  an  overwhelming  amount  of  evidence;  a  statement  of 
staggering  portent  to  all  the  people  of  the  United  States — 
particularly  to  the  wage-earners,  the  small  salaried  men 
and  women — the  non-investors — the  public. 

The  “National  Wealth”  is  mortgaged  to  the  limit,  and 
the  few  hundred,  or  thousand,  constituting  the  Capitalistic- 
Mammonistic  group — four  hundred  or  four  thousand  indi¬ 
viduals,  families  or  estates — (make  it  forty  thousand,  or 
four  hundred  thousand)  hold  the  mortgages.  The  major 
portion  of  the  national  assets — the  valuable,  profitable,  pro¬ 
ductive  properties,  and  natural  resources,  are  virtually 
owmed  by  these  few  thousand.  What  they  do  not  own  out¬ 
right  they  dominatingly  control.  Not  content  with  a  rea- 


Our  National  Wealth 


151 


sonable  profit  from  their  wealth,  they  hit  upon  the  plan  of 
creating  a  tremendous  liability  against  same,  through  the 
instrumentality  of  note  and  bond  issues.  I  do  not  pretend 
to  know  what  portion  of  the  tremendous  note  and  bond 
issues,  aggregating  tens  and  tens  of  billions,  are  in  the 
hands  of  the  ‘  ‘  investor  public  ’  ’ ;  what  portion  is  held  by  the 
few  thousand  constituting  the  Capitalistic-Mammonistic 
group.  It  would  be  interesting  if  this  information  could 
be  obtained.  And  it  would  be  still  more  illuminating  if  we 
had  definite  data  as  to  the  amount  of  the  notes  and  bonds 
originally  purchased,  let  us  say,  by  the  “investor  public,’’ 
that  found  their  way  into  the  banks  and  are  held  by  them 
as  collateral.  In  the  final  summing  up,  I  think,  it  would 
be  found  that  the  major  portion  of  national  assets  and 
liabilities  are  concentrated  in  the  hands  of  a  few  thousand 
— make  it  four  hundred,  or  four  thousand,  or  forty  thou¬ 
sand,  or  four  hundred  thousand,  if  you  like.  (And  I  have 
not  said  one  word  as  yet,  nor  will  I  particularly  dwell  on  it 
now,  of  the  immense  profits  made  by  a  few  from  the  flota¬ 
tion  of  securities  issues  of  all  kinds,  their  underwriting, 
commissions,  etc.)  The  point  I  wish  particularly  to  em¬ 
phasize  here  is  that  the  public — the  wage-earners,  the  non¬ 
investors,  are  paying  interest  both  on  the  assets  and  the 
liabilities — into  the  hands  of  the  Capitalistic  group.  Not 
only  that  but  the  public — the  wage  earners,  the  non-inves¬ 
tors,  will  ultimately  have  to  pay  the  principal  of  the  debt 
— i.  e.  liquidate  the  liabilities.  But  I  have  already  made 
this  clear  to  all  those  who  are  not  purblind. 

A  Word  to  tiie  Dust  Throwers 

I  realize,  perhaps  better  than  most  of  my  readers,  since 
I  have  lived  longer  with  my  subject,  the  danger  of  gener¬ 
alizations.  For  this  reason  let  me  emphasize  that  I  am  not 
overlooking  the  fact  that  in  the  national  liabilities  are  in¬ 
cluded  items  which,  properly  speaking,  are  not  issued  by 
the  Capitalistic  group — for  example,  federal,  state,  and 
municipal  bonds.  But  it  will  not  be  denied  that  the  non¬ 
investor  portion  of  the  public  pays  the  greater  part  of  the 


152 


The  New  Capitalism 


interest ;  and  ultimately  also  the  principal  of  these  national 
(or  public)  debts.  I’ll  waste  no  time  in  insisting  that  the 
public  pays  practically  all  taxes.  It  is  admitted  that  busi¬ 
ness  does  not  pay  the  federal  income  tax;  business  merely 
advances  the  tax ;  ultimately  it  is  collected  from  the  public, 
the  major  portion  of  the  amount  involved  being  paid  by 
that  large  contingent  whose  income  is  small — the  wage 
earners  and  salaried  men  and  women,  the  non-investors, 
and  the  bona  fide  small  investors. 

Let  There  Be  Light 

Note  that  I  have  added  the  bona  fide  small  investors.  I 
have  done  this  purposely :  First,  because  it  is  a  fact ;  and 
secondly,  because  the  Capitalistic  group  has  impressed 
those  who  never  think,  that  a  very  large  number  of  small 
investors  share  in  the  emoluments  of  the  Capitalistic  Sys¬ 
tem.  “If  Big  Business  is  in  a  conspiracy,”  said  Mr. 
Schwab,  “quite  a  few  people  are  involved  in  it.” 

IIow  many  bona  fide  small  investors  are  there?  I  have 
estimated  their  number  at  a  million  and  a  half.  (You  may 
increase  their  number  if  you  have  access  to  statistics  that 
justify  an  increase.)  What  are  the  average  holdings  of  the 
average  small  investor?  Who  knows?  I  don’t!  Let  us 
make  a  guess.  Let  us  say  that  the  par  value  of  the  hold¬ 
ings  of  the  average  bona  fide  small,  non-speculative  investor 
in  securities  of  corporations,  is  $1000.  In  that  case  their 
combined  holdings  would  total  $1,500,000,000 — and  their 
combined  income,  computed  at  six  percent  on  their  invest¬ 
ment  would  aggregate  $90,000,000,  which  is  certainly  a 
trifling  portion  of  the  total  Capitalistic  income. 

But  let  us  not  be  too  conservative  in  our  computations. 
Let  us  say  that  their  average  holdings  are  $5000.  In  that 
case  their  combined  holdings  would  total  $7,500,000,000, 
and  their  combined  yearly  income  $450,000,000,  which  is 
still  a  small  percentage  of  the  aggregate  amount  involved. 

Further  along  in  this  work  of  mine  I  shall  revert  to  the 
bona  fide  small  investor  in  corporate  securities,  and  show 


Our  National  Wealth 


153 


that  he  is  not  a  beneficiary  of  the  Capitalistic  System ;  in¬ 
deed  he  is  penalized  to  the  same  extent  as  the  non-investor. 

Let  the  Authorities  Speak  for  Us 

But  whatever  contentions  those  favorably  disposed 
toward  the  present  Capitalistic  System  may  raise  to  mini¬ 
mize  the  evil  inherent  in  the  System ;  whatever  tactics  they 
may  pursue  to  throw  the  student  off  the  track;  however 
they  may  labor  to  controvert  my  statements — there  is  one 
thing  they  cannot  deny,  and  that  is  that  the  corporate 
wealth  of  the  nation,  whatever  its  amount  may  be,  is  con¬ 
centrated  in  the  hands  of  a  few  hundred  or  thousand — four 
hundred,  or  four  thousand,  or  forty  thousand,  or  four  hun¬ 
dred  thousand,  or  four  million — as  you  choose! 

About  one  hundred  and  forty-seven  years  ago  Adam 
Smith  wrote  a  book,  which  he  called  “The  Wealth  of  Na¬ 
tions.  ’  ’  But  the  wealth  of  a  nation,  is  invariably  owned  by 
a  comparatively  small  number  of  families  or  persons  within 
a  nation.  That  is  true  of  all  nations;  it  is  particularly  true 
of  the  United  States.  In  1890  the  aggregate  wealth  of  the 
United  States  was  $65,000,000,000.  According  to  an  emi¬ 
nent  economist  and  statistician  of  that  time,  Dr.  Charles  B. 
Spahr,  this  wealth  was  distributed  among  the  then  twelve 
and  one-half  million  families  as  follows : 


Aggregate 

Average 

Families 

Wealth 

Wealth 

125,000 

$33,000,000,000 

$264,000 

1,375,000 

23,000,000,000 

16,000 

5,500,000 

8,000,000,000 

1,500 

5,500,000 

800,000,000 

150 

12,500,000 

$65,000,000,000 

$5,200® 

That,  approximately,  was  the  distribution  a  generation 
ago.  Today  a  third  of  a  century  later,  there  are  22  million 
families,  less  than  100  percent  increase;  and  the  aggre- 


5  These  figures  beautifully  illustrate  the  absurdity  of  the  “average 
wealth  per  family”  so  generously  apportioned  by  statisticians.  In 
the  above  statistics  by  Dr.  Spahr  the  average  wealth  of  five  and  a  half 
million  families  is  $150  per  family;  and  the  average  wealth  of  another 
five  and  a  half  million  families  is  $1500  per  family.  But  lo!  to  each 
of  these  11  million  families  the  statistics  allot  $5200  of  wealth. 


154 


The  New  Capitalism 


gate  wealth  is  said  to  be  $288,000,000,000,  an  increase  of 
343  percent.  Thirty-three  years  ago  Dr.  Charles  B.  Spahr 
computed  that  seven-eights  of  the  families  in  the  United 
States  held  but  one-eighth  of  the  national  wealth,  while  one 
percent  of  the  families  held  more  than  the  remaining  99 
percent. 

In  1918  Professor  E.  A.  Ross  declared  that:  “Two  per¬ 
cent  compose  the  rich  and  very  rich,  who  own  about  one 
and  one-half  times  as  much  as  the  other  98  percent  to¬ 
gether.  ’  ’ 

According  to  the  latest  statistics,  compiled  by  Henry  H. 
Klein,  First  Deputy  Commissioner  of  Accounts  of  the  City 
of  New  York,  and  published  in  his  book  “Dynastic  Amer¬ 
ica’  ’  (1921),  even  less  than  one  percent  of  the  families 
own  one-half  of  the  country’s  wealth.  According  to  Mr. 
Klein,  one  family  (John  D.  Rockefeller’s)  owns  approxi¬ 
mately  one  percent  of  the  country’s  wealth,  or  $2,400,- 
000,000 ;  over  forty  families  have  wealth  in  excess  of 
$100,000,000;  more  than  one  hundred  other  families,  in 
excess  of  50  million  dollars  each;  more  than  three  hun¬ 
dred  other  families,  in  excess  of  20  million  dollars  each. 
In  addition  to  these  Mr.  Klein  gives  a  list  of  sixty-five  fami¬ 
lies  whose  wealth  is  between  10  and  20  million,  and  sixty- 
five  whose  wealth  is  between  5  and  10  million.  “The  list 
of  those  who  died  in  the  present  generation  leaving  between 
one  and  five  million  is  too  long  to  print,”  says  the  author 
of  “Dynastic  America.”  “It  contains  several  thousand 
names.  ’  ’6 


Mammonism — The  National  Menace 

Professor  E.  R.  A.  Seligman,  head  of  the  Department 
of  Economics  of  Columbia  University,  recently  defined 
Capitalism  as  “that  form  of  industrial  organization  where 
the  means  of  production  and  by  that  I  mean  primarily  un¬ 
der  modern  technological  conditions — the  machine,  and  the 

6 1  happen  to  know  that  Mr.  Klein  has  taken  great  pains  to 
gather  the  data  for  his  statistics,  and  for  this  reason  consider  his  com¬ 
pilations  of  great  value  in  a  study  of  our  national  wealth. 


Our  National  Wealth 


155 


funds  required  to  work  the  machine,  are  in  the  control  of 
private  individuals.777 

That  is  a  very  good  definition  for  Capitalism;  but  the 
point  I  raise  is  that  the  character  of  Capitalism  has  changed 
completely  during  the  past  twenty  years  and  no  longer  de¬ 
serves  to  be  called  Capitalism,  but  by  its  new  name, 
MAMMONISM.  Therefore,  adapting  Professor  Seligman’s 
definition  to  the  altered  conditions,  we  may  say  that  Capi¬ 
talistic  Mammonism  is  that  form  of  industrial  organization 
where  the  means  of  production — the  machine — and  the 
funds  required  to  work  the  machine,  are  concentrated  in 
the  hands  of  a  very  small  number — a  few  thousand  indi¬ 
viduals,  families  or  estates,  and  into  whose  coffers  most  of 
the  profits  flow. 

The  Capitalistic  Sport  of  Knocking  Down 

Straw  Men 

A  number  of  the  Capitalistic  apologists,  for  reasons  not 
difficult  to  understand,  have  recently  put  forth  arguments 
and  statistics  calculated  to  show  that  a  greater  distribution 
of  wealth,  or  a  more  equable  division  of  the  profits,  would 
be  of  little  benefit  to  the  workers  or  the  public  in  general. 

An  article7 8  by  George  E.  Roberts  (Vice  President  of  the 
National  City  Bank  of  New  York),  entitled  “If  We  Divided 
All  the  Money — How  Much  Do  You  Think  You  Would 
Get?77  emphasizes  that  if  all  the  wealth  in  this  country 
were  divided  among  the  people,  each  would  receive  only  a 
small  sum — a  negligible  amount  hardly  worth  while  both¬ 
ering  about.  Mr.  Roberts,  referring  to  Professor  Willford 
Isbell  King’s  book,  “Wealth  and  Income  of  the  People  of 
the  United  States, 7  7  says : 

“Professor  King  found  that  if  all  the  profits  which  now 
go  to  pay  interest  and  dividends  were  to  be  divided  among 
all  the  wage  earners,  the  result  gained  to  the  wage  earners 
could  not  be  more  than  25  percent  of  their  present  income 

7  Debate  between  Professor  E.  R.  A.  Seligman  and.  Professor  Scott 
Nearing,  Lexington  Theatre,  New  York  City,  January  23,  1921. 

8  Originally  published  in  the  American  Magazine  and  reprinted  in 
pamphlet  form,  1920. 


156 


The  New  Capitalism 


from  wages.  Of  course,  if  the  wage  earner  owned  his  home, 
or  had  any  other  investment,  the  loss  on  this  might  wipe 
out  the  gain  in  the  salary  or  wages.” 

Mr.  Roberts  furthermore  tells  us  that  Professor  David 
Friday,  who  also  “has  made  a  similar  study  of  incomes 
.  .  .  found  that  the  average  wage  in  the  chief  industries 
in  1918  was  about  $1320  a  year.9  .  .  .  and  that  if  all 
interest  and  dividend  payments,  that  is,  the  amount  realized 
from  the  use  of  capital  employed  in  carrying  on  the  same 
industries,  the  average  wage  would  be  increased  only  about 
$330  a  year.” 

Mr.  Roberts  a  little  later  approaches  the  subject  from  a 
slightly  different  angle,  and  shows,  or  attempts  to  show, 
that  if  the  big  salaries  paid  to  officials  and  managers  wrere 
divided  among  the  workers,  it  would  be  only  a  trifling  sum 
for  the  workers.  In  the  case  of  the  Bell  Telephone  system 
such  a  division,  we  are  told,  would  have  raised  the  average 
pay  of  the  workers  only  17  cents  a  week,  or  $9.00  a  year. 

Why  this  kind  of  figuring ;  what  prompts  it  if  not  a  burn¬ 
ing  desire  on  the  part  of  the  conspicuous  members  of  the 
Capitalistic  group  to  throw  dust  into  the  eyes  of  the  public 
— that  dear  public  which  they  violently  protest  they  love  so 
much,  and  of  which  they  are  always  so  considerate?  Who 
is  clamoring  for  an  equal  division,  either  of  wealth  or  of 
profits  ?  Certainly  not  I ;  nor  any  considerable  part  of  the 
people.  There  may  be  in  the  United  States  a  few  hundred 
thousand  extremists  who  are  clamoring  for  an  equal  divi¬ 
sion  of  the  country’s  wealth,  properties,  and  its  earnings; 
but  there  are,  in  round  numbers,  fully  one  hundred  million 
people  who  are  not  crying  for  the  moon,  and  who  are  not 
asking  that  the  national  wealth  and  the  national  income  be 
equally  distributed  or  evenly  divided  among  them.  Pre¬ 
cisely  what  is  to  be  gained  by  setting  up  a  straw  man  and 
then  valiantly  knocking  him  down? 

9  I  do  not  know  upon  what  statistics  Professor  Friday  computed 
his  average  wage  of  $1320.  My  own  computations  would  seem  to 
indicate  that  Professor  Friday’s  average  is  exceedingly  high. 


Our  National  Wealth 


157 


There’s  Method  in  Their  Madness 

Ill  tell  you  what  is  gained  by  it.  They  want  to  hide 
from  the  public :  First :  that  an  abnormal  part  of  the 
national  income  is  retained  by  them ;  and  secondly :  that 
it  was  by  the  petty  process  of  extorting  a  few  pennies,  a 
trifling  sum,  a  seemingly  negligible  amount  from  the  non¬ 
investors  that  the  Capitalistic  group  has  built  up  its 
gigantic  System,  accumulated  its  colossal  capital  and  piled 
up  its  fabulous  wealth.  The  Capitalistic  System  began 
with  penny  extortion;  it  has  developed  into  a  System  of 
dollar  extortion.  You  can  easily  compute  it  for  jmirself. 
If  the  Capitalistic  System  can,  under  one  pretext  or 
another,  in  addition  to  a  fair  and  legitimate  profit,  extort 
an  average  of  ten  cents  a  day  from  each  of  the  100,000,000 
men,  women  and  children  in  the  United  States  (which  is 
fifty  cents  a  day  per  family)  it  is  enriching  itself  by  ten 
million  dollars  a  day — or  $3,650,000,000  a  year. 

Penalizing  the  Non-Investor  $ 750  a  Year 

According  to  my  computations  the  Capitalistic  System 
is  collecting  considerably  more  than  fifty  cents  a  day,  over 
and  above  a  fair  profit  from  the  average  non-investor  (and 
also  from  the  small  investor)  family.  According  to  my 
figures  it  is  collecting  more  than  $2.00  a  day  from  each 
non-investor  family — $750  a  year — through  the  medium  of 
higher  living  costs.  In  view  of  the  fact  that  the  living  costs 
of  the  average  family  have  advanced  from  about  $650  in 
1900  to  $1550  in  1920,  I  consider  my  estimate  of  $750  a 
year  extremely  conservative.  I  do  not  mean  to  say  that 
all  of  this  $750  is  confiscated  by  the  few  thousand  consti¬ 
tuting  the  Capitalistic  nucleus;  it  is  distributed  among 
whatever  number  constitutes  the  Capitalistic  System.  Let 
us  not  forget  that  His  Royal  Highness — the  Landlord — 
who  has  just  recently  come  into  his  own,  and  who  lias 
learned  every  Capitalistic  trick — is  getting  a  considerable 
slice  of  it.  And  a  fair  part  of  it  goes  for  taxes — but  the 
non-investor  pays ! 


158 


The  New  Capitalism 


What  the  Non-Investor  Pays 

If  you  find  it  difficult  to  grasp  that  the  non-investor 
family  is  mulcted  of  about  $750  a  year,  remember  what  the 
non-investor  pays :  He  pays  the  interest  on  the  actual 
investment,  as  well  as  interest  on  the  inflated  valuation  of 
all  properties;  interest  on  the  stocks,  and  on  the  bonds 
issued  against  the  inflated  valuation;  besides  interest  on 
every  dollar  of  capital  borrowed  by  corporations  in  the 
course  of  doing  business.  He  pays,  moreover,  every  dollar 
of  rent,  every  dollar  of  insurance,  and  every  dollar  of  taxes, 
for  all  of  these  items  are  overhead  expense  and  are  charged 
up  to  cost  of  production;  and  the  non-investor  pays  them 
all.  He  also  pays  a  certain  amount  set  up  as  reserves,  sur¬ 
plus,  depreciation,  sinking  and  sundry  Capitalistic  funds. 
And  he  pays  his  own  wages,  and  the  salaries  of  the  corpor¬ 
ation  officials  and  managers.  Just  a  word  of  comment 
about  the  latter  item.  Blame  Mr.  Roberts,  if  it  is  a  digres¬ 
sion. 


The  Reverse  Side  of  the  Shield 

It  may  be  true,  as  Mr.  Roberts  tells  us,  that  if  the 
salaries  of  the  officials  and  managers  of  corporations  were 
divided  among  the  wage  earners  and  small  salaried  em¬ 
ployees,  that  each  worker  would  receive  only  a  few  dollars 
— say  ten  or  twenty  dollars  a  year  more.  So  far  as  I  know 
nobody  has  raised  the  question  to  date.  But  since  Mr. 
Roberts,  and  others,  have  computed  what  such  income  of 
officials,  managers,  etc.,  if  distributed  among  the  employees 
would  amount  to,  I  insist  that  they  also  show  the  reverse 
side  of  the  shield.  Thus  we  have  seen  that  317,579  corpor¬ 
ation  officials  in  1918  paid  themselves  as  “compensation” 
an  amount  aggregating  $2,225,543,259.  In  other  words, 
each  of  ,the  sixteen  million  wage  earner  or  non-investor 
families  in  1918,  contributed  over  $100  toward  paying 
the  salaries  of  the  317,579  corporation  officials. 

If  I  felt  disposed  to  push  the  inquiry  further,  and 
relentlessly  pursue  the  argument  so  blithely  begun  by  Mr. 


Our  National  Wealth 


159 


Roberts,  I  would  ask  him  why  should  the  wage  earners  pay 
the  salaries  of  the  corporation  officials  and  managers,  out 
of  their  wages.  His  answer,  no  doubt,  would  be  interest¬ 
ing,  and  perhaps  reveal  the  queer  processes  of  the  Capi¬ 
talistic  mind.  ‘‘Speak,  thy  servant  hears!” 

In  the  meantime  I  should  like  to  whisper  a  word  of 
friendly  counsel  into  the  Capitalistic  ear — namely  that 
skating  on  thin  ice  is  a  dangerous  sport ;  also  that  it  is  not 
wise  to  monkey  with  a  buzz  saw,  or  poke  a  stick  into  a 
hornet’s  nest. 

Excessive  Capitalistic  Pro  jits 

Let  me  repeat  that  I  never  have,  and  do  not  now,  ask  for 
an  equal  division  of  the  profits  (and  certainly  not  of 
wealth).  I  hold,  and  shall  at  all  times  defend  the  prin¬ 
ciple,  that  capital — legitimate  and  actual  capital — is 
entitled  to  a  reasonable  profit,  and  that  the  Ijona  fide 
investor  is  entitled  to  a  fair  return  on  his  investment. 
No !  it  is  not  a  wider  distribution  of  the  present  excessive 
profits  that  I  would  advocate — but  a  system  of  economics 
under  which  there  would  be  a  considerably  smaller  volume 
of  profit  than  at  present,  going  to  the  Capitalistic  group — 
or  Capitalistic  “investors” — a  system  under  which  exces¬ 
sive  profits  would  be  impossible.  Here  you  have  the  gist 
of  my  thought  on  this  entire  subject. 

Less  Capitalistic  Pro  jit  and  Greater  Wage 

Savings 

In  plain  English — the  profits  of  the  Capitalistic  System 
are  excessive,  and  the  non-investor  pays.  Isn’t  it  rather 
strange  that  not  one  of  these  bright  men  who  have  com¬ 
puted  how  small  a  part  of  the  excessive  profits,  if  they  were 
evenly  distributed,  would  go  to  Labor,  has  ever  pointed  out 
thaf  the  profits  are  excessive,  nor  has  one  ever  tried  to 
score  the  point  that  if  the  profits  of  the  Capitalistic  System 
were  less  excessive — the  average  family  (granting,  of 
course,  a  reasonable  wage  or  family  income)  could  save  at 
least  a  small  portion  each  year  out  of  its  income.  Nor  has 


160 


The  New  Capitalism 


any  statistical  expert  ever  gone  to  the  trouble  of  trying  to 
express  in  figures  precisely  what  less  corporation  profit, 
and  more  savings  on  the  part  of  the  wage  earner  families, 
would  mean  to  the  latter.  Thus: 

If  each  of  16,000,000  wage  earner  families  had  been 
enabled  to  save  only  $100  a  year  (about  27  cents  a  day) 
during  the  past  twenty  years — each  family  would  have 
saved  $2000,  or  collectively  the  stupendous  sum  of  $32,000,- 
000,000. 

And  if  they  could  have  saved  $200  a  year  (about  fifty- 
five  cents  a  day)  each  family  would  have  $4000,  or  collec¬ 
tively  a  wealth  accumulation  of  $64,000,000,000. 

And  so  on!  “Many  a  little  makes  a  Mickle,”  applies 
to  the  wage  earner  as  well  as  to  the  Capitalist. 

Figuring  Another  Way 

Nor  has  any  keen  minded  Capitalistic  analyst  ever 
pointed  out  that  if  the  Capitalistic  System  can  continue 
to  extort  from  sixteen  million  families — say  an  average 
of  $500  a  year — it  wrill  collect  $8,000,000,000  a  year  or 
$160,000,000,000  during  the  next  twenty  years. 

No !  Not  a  more  equable  distribution  of  the  excessive 
profits  among  a  large  number  but  a  decided  diminution 
of  the  excessive  profits  that  are  now  demanded  by  the  com¬ 
paratively  small  number  constituting  the  Capitalistic  Sys¬ 
tem.  That  is  all  that  those  who  work  for  a  wage  are 
demanding  when  they  ask  a  fair  recompense  for  their  labor 
— not  a  division  of  wealth,  but  an  opportunity  to  acquire 
some  of  it ;  not  an  undue  proportion  of  the  national  income, 
but  a  chance  to  save  a  fraction  of  it,  so  that  they  might  not 
be  thrown  on  the  rude  mercies  of  the  world — when  sick¬ 
ness,  age,  or  infirmity  steals  upon  them.  Is  their  demand 
unreasonable  ? 

Concentration  of  Wealth  . 

Political  Economy  is  said  to  be  “the  science  that  treats 
of  the  nature,  the  production  and  the  distribution  of 
wealth As  a  matter  of  fact  Political  Economy,  without 


Our  National  Wealth 


161 


pausing  to  deny  that  it  is  a  ‘ 'science,”  concerns  itself  not 
at  all  with  the  distribution  of  wealth,  but  rather  with  the 
concentration  of  wealth.  “ Distribution  of  wealth7’  in 
economistic  circles  is  clearly  a  figment  of  the  mind.  Surely 
when  80  per  cent  of  a  nation’s  population,  in  spite  of  an 
admitted  productive  power,  possess  little  or  no  wealth,  and 
are  deliberately  prevented  from  sharing  in  the  wealth  they 
admittedly  produce,  there  should  not  be  such  loud  talk 
about  its  distribution.  To  speak  of  the  wealth  of  a  nation, 
or  its  distribution,  when  a  majority  of  the  families  consti¬ 
tuting  the  nation  possess  no  wealth — or  just  enough  to 
keep  them  out  of  the  poorhouse — is  playing  deuces  wild 
with  words. 


CHAPTER  XIV 
The  National  Income 


IT  is  significant  that  there  are  no  worth-while  statistics 
pertaining  to  the  “National  Income” — that  is  to  say, 
the  aggregate  income  of  all  the  people  living  within  the 
nation.  It  would  be  comparatively  easy  to  compile  such  sta¬ 
tistics  if  all  concerned  were  honest  enough  to  furnish  the 
necessary  data.  The  government  is  spending  tens  of  millions 
of  dollars  annually  for  the  gathering  of  data,  and  the  com¬ 
puting,  compiling  and  classifying  of  statistics  on  hundreds 
of  subjects  in  most  of  which  the  general  public  has  neither 
concern  nor  interest.  So  far  as  I  know,  no  systematic 
effort  has  ever  been  made  to  definitely  ascertain  the  actual 
income  of  all  the  people  of  the  nation,  derived  from  all 
possible  income  sources.  There  are  in  existence  unrelated 
sets  of  earnings  or  income  statistics  for  a  few  groups,  gath¬ 
ered  and  compiled  by  government  bureaus,  but  they  are 
fragmentary,  and,  on  account  of  their  incompleteness, 
worthless  for  any  practical  purpose.  Most  of  them  are 
estimates  or  generalizations  based  upon  data  obtained  from, 
or  for,  a  limited  number  of  persons  within  a  given  group ; 
and  one  doubts  the  accuracy  of  the  data.  Under  the  cir¬ 
cumstances  their  scientific  value  is  nil. 

Even  the  “Statistics  of  Income”  compiled  from  the 
income  tax  returns,  under  the  direction  of  the  Commis¬ 
sioner  of  Internal  Revenue  for  1917,  when  all  persons  with 
a  net  income  of  $2000  a  year,  and  since  1918,  when  all 
persons  with  a  net  income  of  $1000  a  year,  were  obliged 
to  file  an  income  tax  return,  are  of  no  particular  value,  for 
the  published  statistics  give  no  hint  of  the  actual  total 
income  of  even  those  who  reported,  and  none  for  those 
whose  net  income  fell  below  $1000. 


162 


The  National  Income 


163 


George  E.  Roberts,  Vice-President  of  the  National  City 
Bank  of  New  York,  in  an  address  delivered  npon  the  occa¬ 
sion  of  his  retirement  from  the  Presidency  of  the  American 
Statistical  Association,1  bewailed  the  fact  that  there  was 
no  reliable  information  with  regard  to  the  national  income ; 
no  comprehensive  statement  showing  “how  it  was  disposed 
of,  who  absorbed  and  enjoyed  it,”  etc.;  and  declared  that 
such  a  statement 1  ‘  would  take  the  place  of  anonymous  esti¬ 
mates  in  circulation.” 

It  is,  perhaps,  nugatory  to  ask  why  has  the  American 
Statistical  Association,  in  the  more  than  eighty  years  of  its 
existence,  never  made  an  effort  to  obtain  the  data  necessary 
for  a  set  of  worth-while  statistics  pertaining  to  the  incomes 
of  all  the  people  derived  from  all  sources.  Either  the 
American  Statistical  Association  is  lacking  in  ingenuity 
and  does  not  know  how  to  go  about  accomplishing  so  simple 
a  task,  or  else  it  believes  in  the  saying  “where  ignorance 
is  bliss  ’twere  folly  to  be  wise.” 

In  the  absence,  then  of  any  definite  information  on  so 
vital  a  subject  as  the  incomes  of  the  people  of  the  United 
States,  and  the  sources  from  which  their  incomes  are 
derived,  we  must  turn  to  the  studies  of  men  who,  consider¬ 
ing  the  limited  data  and  fragmentary  material  at  their 
disposal,  have  made  computations  which,  while  neither 
scientific  nor  conclusive  are  at  least  interesting  and  indica¬ 
tive. 

The  Income  “Authorities” 

I  have  before  me  as  I  am  writing  this  chapter,  Professor 
Willford  Isbell  King’s  “The  Wealth  and  Income  of  the 
United  States.”  Professor  King  is  recognized  among  the 
statisticians  and  students  of  sociology  and  of  the  econom¬ 
ists  in  this  country  “as  a  very  eminent  man  in  his  particu¬ 
lar  field.”  (His  studies  do  not  extend  beyond  the  year 
1910.)  Also  a  recently  published  book  entitled,  “The 
Income  in  the  United  States — Its  Amount  and  Distribution 


l  “The  Equilibrium  in  Industry,”  an  address  delivered  Dec.  29,  1920. 


164 


The  New  Capitalism 


from  1909-1919  — and  which  purports  to  be  a  summary 
of  an  exhaustive  statistical  analysis  of  the  income  of  the 
United  States  for  each  year,  1910-1919,  prepared  by  the 
staff  of  the  National  Bureau  of  Economic  Research:  Wes¬ 
ley  C.  Mitchell,  Willford  I.  King,  Frederick  R.  Macaulay 
and  Oswald  W.  Knauth.  Also  the  Statistics  of  Income, 
compiled  from  the  returns  for  1918,  under  the  direction  of 
the  Commissioner  of  Internal  Revenue.  Besides  a  half 
dozen  books  of  a  less  pretentious  character,  dealing  in  a 
fragmentary  and  desultory  way  with  Incomes,  Profits, 
Wages,  etc. 

I  had  originally  intended  to  go  into  an  extended  analysis 
of  all  available  income  statistics  and  statements  pertaining 
thereto,  but  discovered  that  this  would  lead  me  too  far 
afield.  For  the  sake  of  brevity  I  have  concluded  to  con¬ 
fine  myself  in  this  chapter  to  a  few  independent  comments, 
observations  and  conclusions,  on  some  of  the  principal 
points  involved  in  the  subject — the  National  Income. 

What  Is  Income  ? 

I  suppose,  to  do  myself  justice,  I  ought  to  go  into  lengthy 
definitions  of  Income,  Profit,  etc.,  and  sundry  other  terms 
conspicuous  in  the  Capitalistic  glossary  and  current  in 
Accountancy  parlance.  But  I  will  not  enter  into  that  at 
present.  Nevertheless  when  the  Secretary  of  the  United 
States  Treasury  Department  maintains,  and  the  Supreme 
Court  of  the  United  States,  decides  that  stock  dividends 
are  not  income,  it  is  easy  for  a  mere  student  to  run  a-foul 
of  Capitalistic  finicalness.  Briefly  let  me  say  that  every 
profit  is  an  income,  but  not  every  income  is  a  profit.  For 
example,  wages  are  income,  but  not  profit.  But  when 
income  is  convertible  into  property,  capital  or  wealth, 
then  it  becomes  profit,  no  matter  with  what  mystic  terms 
the  fact  is  disguised  or  obscured. 

But  you  may  dismiss  what  I  say  on  this  subject,  and  be 
guided  entirely  by  what  the  economic  authorities  have  to 
say.  Professor  King  says:  “A  workman’s  wages,  interest 
on  loans,  the  rent  of  land,  and  the  profits  of  business  men, 


The  National  Income 


165 


are  all  classified  as  income.  A  man  is  said  to  receive 
income  through  gifts  or  inheritance,  through  a  rise  in  the 
value  of  property  in  his  possession,  through  winnings  from 
lotteries  or  gambling,  or  from  the  sale  of  products  which 
he  himself  manufactures  or  produces  from  the  soil.” 

We  may  accept  this  definition  as  coming  within  the 
limits  of  permissibility,  though  in  an  argument  I  should 
protest  against  considering  “a  rise  in  the  value  of  prop¬ 
erty”  as  income.2  However,  it  is  not  to  argue  but  rather 
to  clear  the  subject  of  inherent  obscurities  that  I  am  writing 
this  chapter.  To  me  an  income,  statistically  figured,  must 
be  an  actual  money  income,  or  convertible  into  money  or 
property,  capital  or  wealth.  The  line  must  be  drawn  some- 
Avhere,  for  if  things  other  than  actual  revenue  derived  from 
one  of  the  admitted  and  legitimate  sources  are  computed  as 
income,  money  statistics  are  meaningless,  and  the  whole 
subject  is  reduced  to  an  absurdity. 

“Reductio  ad  Abswrdum” 

This  tendency  to  include  under  1 1  Income  ’  ’  sundry  things 
to  which  it  is  utterly  impossible  to  give  a  money  value,  is 
rampant  among  statisticians  and  economists,  and  Professor 
King  admits  it.  ‘‘In  recent  years,”  he  says,  “most  econo¬ 
mists  have  added  to  the  income  list  those  pleasures  which 
a  person  receives  from  the  use  of  free  goods.  A  man  enjoys 
a  beautiful  sunset.  Does  he  not  receive  income  as  truly  as 
the  man  who  enjoys  the  Oriental  rug  in  his  home  ?  One  is 
free  and  the  other  costs  money,  but  both  alike  appeal  to  the 
man’s  sense  of  beauty.” 

Absurdity  can  go  no  further !  The  pity  is  that  the  idio¬ 
syncrasies  of  statisticians,  and  vagaries  of  economists  are 
becoming  painfully  apparent  in  their  so-called  “Income 
studies.”  For  example,  on  page  59  of  “The  Income  in  the 

^  I  think  I  have  shown  at  sufficient  length  how  “the  value  of 
property”  has  been  artificially  and  arbitrarily  inflated — to  the  tune 
of  billions  of  dollars.  I  am  willing  to  consider  the  dividends  or  inter¬ 
est  derived  from  the  inflated  valuation  as  “income”  but  not  the  rise 
In  the  inflation  itself.  If  anyone  insists  on  including  the  fictitious 
Inflation  in  value  in  the  statistics,  it  behooves  me  to  say  that  the 
proper  place  is  in  the  Wealth  statistics — not  the  Income  section. 


166 


The  New  Capitalism 


United  States” — (one  of  the  books  before  me) — it  is  seri¬ 
ously  proposed  to  include  in  the  “ national  income”  the 
hypothetical  wages  of  eighteen  to  twenty  million  “Amer¬ 
ican  women,  sixteen  years  of  age  and  over,  engaged  in  their 
own  homes  without  monetary  remuneration.”  Thus,  for 
1919  we  find  $900  allotted  per  housewife;  and  the  “money 
value”  of  their  aggregate  services  is  computed  at  $18,450,- 
000,000.  However  great  a  value  one  may  place  on  the 
services  of  housewives,  (and  the  value  of  their  services  is 
inestimable)  what  has  value  to  do  with  actual  income? 
The  truth  is  that  housewives  throughout  the  world  are  not 
receiving  any  money  compensation;  and  statisticians  have 
no  right  whatever  to  credit  them  with  a  money  revenue 
that  they  do  not  receive.  The  outstanding,  glaring  fact  is 
that  the  eighteen  or  twenty  million  American  housewives 
are  not  receiving  $18,450,000,000  in  the  course  of  twelve 
months  for  the  work  they  do  in  their  homes.  Why,  then, 
pretend  that  they  are? 

Sunsets,  and  evening  stars,  fresh  air,  clear  skies,  and  cool 
summer  breezes,  however  delightful  and  enjoyable,  are  not 
Money  Income.  That ’s  flat !  The  mythical  wages  of  house¬ 
wives  buy  no  hats,  nor  shoes,  nor  bread.  Let’s  have  done 
with  this  kind  of  economic  tom-foolery ! 

The  Non-Investor’s  Income  Is  Gross  and 

Disappears 

Before  entering  upon  an  analysis  of  the  national  income 
I  want  to  fix  another  point  clearly  in  the  mind  of  the 
reader.  I  am  not  aware  that  a  single  economist  has  ever 
commented  on  the  fact  that  in  all  the  statistics  for  incomes 
there  is  a  queer  mixture  of  gross  and  net  income.  With 
regard  to  the  non-investors  their  income  is  in  all  cases  gross. 
This  is  predicable  of  all  wage  earners,  which  includes  the 
small  salaried  men  and  women,  small  business  men,  most 
professional  men,  in  brief  all  those  receiving  the  equivalent 
of  an  average  wage.  I  beg  the  readers  to  bear  this  in  mind. 
The  income  of  the  wage  earners  is  gross.  There  are  no 


The  National  Income 


167 


reserves,  no  surplus,  no  undivided  profits,  no  depreciation 
and  replacement  fund,  no  dividend-earning  assets,  no  in¬ 
terest  bearing  securities,  no  principal,  no  wealth,  no  capital, 
nothing  except  their  wage  income,  which  in  most  cases  is 
spent  before  it  is  received. 

Out  of  this  gross  income  (their  wages)  the  non-investors 
must  pay  the  living  expenses  of  themselves  and  those  de¬ 
pendent  upon  them,  which  leaves  them  penniless  at  the  end 
of  the  year.  While  the  wage  earners  are  accredited  by  the 
statisticians  with  having  received  a  formidable  amount  of 
wages  (income)  in  the  course  of  twelve  months — the  sta¬ 
tistics  are  silent  concerning  the  fact  that  generally  speaking 
the  wage  earner’s  income  has  entirely  disappeared  by  the 
end  of  the  year. 

The  Investor’s  Income  is  Net ,  and  Accumulates 

Whereas  the  income  of  investors,  of  those  whose  revenue 
is  derived  from  other  sources  than  wages — from  invest¬ 
ments  or  speculation — dividends,  interest  or  rent,  is  net 
income — i.  e.  profit.  If  it  is  argued  that  these,  too,  must 
pay  their  living  expenses  out  of  their  income,  I’ll  agree. 
But  there  is  this  to  say — that  after  a  reasonable  deduction 
for  living  expenses  a  vast  amount  of  the  income  remains 
and  is  converted  into  additional  profitable  investments, 
from  the  accumulation  of  which  the  investors  will  derive  a 
constantly  increasing  revenue  in  the  succeeding  years. 
How  great  the  aggregate  amount  of  net  income  is  can  be 
judged  from  the  capital  accumulations  during  the  past 
twenty  years,  which  show  an  increase  in  the  national  wealth 
of  about  ten  billion  a  year. 

Nor  must  we  forget  that  in  addition  to  interest,  dividends, 
rent  and  sundry  profits,  many  of  the  investors  receive  a 
salary  or  compensation,  which,  in  most  cases,  is  far  in 
excess  of  living  expenses.  Thus,  for  example,  the  United 
States  Income  Statistics  for  1918  show  that  in  that  year 
317,579  corporations  reported  $2,225,543,259  as  “compen¬ 
sation  of  officials.” 


168 


The  New  Capitalism 
National  Income  Estimates 

According  to  Professor  King  (Table  XXX,  p.  158)  the 
total  national  income  for  the  year  1910  was  $30,529,500,000. 

According  to  Otto  H.  Kahn,  the  total  national  income 
for  the  year  1918  was  $55,000,000,000. 

Estimates  made  by  statistical  experts  place  the  national 
income  in  1918  between  fifty-five  and  sixty  billion. 

It  is  immaterial  whether  we  fix  upon  fifty-five  or  sixty 
billion  as  the  approximately  correct  estimates  for  1918. 

The  following  statistics  from  ‘  ‘  The  Income  in  the  United 
States”  (Table  2)  make  an  attempt  at  giving  the  amount 
of  income  and  the  sources  from  which  derived,  and  are, 
therefore,  of  especial  interest  here. 


Percent  of 


1918 

Total  Income 

Agriculture  . 

$12,682,000,000 

21.01 

Mineral  production  . 

2,013,000,000 

3.33 

Manufacturing 

A.  Factories  . 

16,018,000,000 

1,280,000,000 

26.53 

B.  Construction  . 

2.12 

C.  Other  trades  . 

1,704,000,000 

2.82 

Transportation 

A.  Railway,  Pullman,  Express, 

Switching,  and  Terminal 

Companies  . 

3,684,000,000 

6.10 

B.  Street  Railway,  Electric  Light 
and  Power,  Telegraph  and 

Telephone  Companies  . 

1,042,000,000 

1.73 

C.  Transportation  by  water.  .  .  . 

506,000,000 

.84 

Banking  . 

767,000,000 

1.27 

Government  . 

5,352,000,000 

8.87 

Unclassified  industries  and  miscel- 

laneous  income  . 

15,318,000,000 

25.38 

$60,366,000,000 

100.00 

By  Way  of  Comment 

I  cannot  forbear  to  make  a  few  comments  on  Ihe 
above  statistics.  For  example — take  the  item  Agriculture. 
According  to  the  United  States  Statistical  Abstract  (1920) 
the  value  of  the  farm  wealth  produced  in  1918,  is  given  as 


The  National  Income 


169 


$22,480,000,000.  In  the  above  statistics  (Table  2),  the  in¬ 
come  derived  from  Agriculture  is  given  as  $12,682,000,000, 
which  raises  the  questions:  How  is  the  “income”  com¬ 
puted  ?  Is  the  income  gross  or  net  ?  Has  an  allowance  been 
made  for  rent  and  food?  For  interest  on  investment,  and 
salaries  of  owners  or  managers?  Does  the  figure  given 
cover  the  income  of  all  those  engaged  in  agriculture,  or 
only  of  the  farm  owners,  tenants,  share  farmers,  etc.  ?  Are 
wages  paid  to  farm  laborers,  included  in  the  figure  given? 
Is  the  unsold  portion  of  the  farmers’  products  included  in 
“income”?  Are  the  theoretical  wages  of  the  farmers’ 
wives  for  household  work  or  farm  labor  taken  into  con¬ 
sideration,  etc.?  When  sunsets  and  waterfalls,  and  rain 
and  sunshine  can  be  considered  as  “income,”  it  behooves 
one  to  inquire  carefully  just  what  has  been  included  in 
income,  and  what  deductions  and  allowances  have  been 
made,  etc. 

Or  take  the  item  Government.  I,  for  one,  question  the 
right  to  include  Government  in  any  Income  schedule. 
Under  no  circumstances  can  the  income  of  the  Government 
be  considered  as  part  of  the  national  income;  it  is  clearly 
a  national  expense.  None  will  dispute  that  the  expenses 
of  the  Government  are  paid  out  of  the  income  of  the  people, 
principally  out  of  the  wages  of  non-investors  through  the 
medium  of  direct  and  indirect  taxes.  But  if  it  is  contended 
that  it  is  legitimate  to  consider  the  expense  of  Government 
as  a  national  income  item,  then  I  shall  insist  that  the  full 
amount  of  government  expense  be  included,  state,  city, 
county,  etc.,  as  well  as  federal. 

I  could  note  a  few  other  incongruities  in  Table  2,  but 
that  is  irrelevant  at  this  time.  However,  just  to  satisfy 
my  curiosity,  I  should  like  to  know  whether  no  income  is 
derived  from  stock  transactions — the  repeated  buying  and 
selling  of  securities,  stocks,  bonds,  notes,  mortgages,  etc.,  by 
a  comparatively  small  group  of  “investors.”  Surely  it  is 
a  considerable  item.  Also  the  Board  of  Trade  transactions 
in  cereals,  produce,  etc.,  involving  billions  in  the  course  of 


170 


The  New  Capitalism 


a  year.  Also  where  is  the  income  derived  from  the  buying 
and  selling  of  real  estate,  land,  buildings,  etc.  Also  what 
percentage  of  the  national  income  is  derived  from  the 
Insurance  business?  Etc.,  etc.  Is  it  possible  that  all  these 
things  are  lumped  under  “Unclassified  Industries  and 
Miscellaneous  Income”?  If  so  I  should  like  to  see  them 
classified,  and  itemized. 

Merged  Statistics 

But  these  things  are  really  beside  the  question  at  this 
time.  What  concerns  us  most  just  now  is  that  the  statistics 
in  Table  2  give  no  hint  nor  clew  as  to  the  wage  earners’ 
share  in  the  national  income.  And  that  is  what  I  want  to 
know  most.  If  the  national  income  in  1918  was  sixty  bil¬ 
lion,  or  as  the  conservative  Mr.  Kahn  claims,  fifty-five 
billion,  what  proportion  of  the  income  went  to  the  wage 
earners,  the  small  salaried  men  and  women — in  brief  the 
non-investors  ? 

No  “study”  that  I  have  ever  seen  answers  this  question. 
In  the  book,  “The  Income  of  the  United  States,”  Table  21 
(p.  107),  gives  a  “rough  estimate”  of  the  income  from  all 
sources  of  salary  and  wage  workers.  I  should  say  the 
estimate  is  rough,  exceedingly  rough — wages  and  salaries 
lumped  as  usual,  and  the  meager  salary  of  the  clerk  merged 
into  the  munificent  reward  of  the  employers. 

The  ‘  *  rough  estimate  ’  ’  raises  a  point  worthy  of  some  note 
in  a  chapter  dealing  with  the  national  income.  For  some 
mysterious  reason  “Wages  and  salaries”  are  lumped  in 
practically  all  income  statistics;  also  in  corporations’  re¬ 
ports.  Moreover,  under  “salaries”  is  included  the  salary 
paid  to  the  clerk  employee  and  to  the  high  officials.  I  find 
it  difficult  to  make  myself  believe  that  this  lumping  of 
wages  and  salaries  is  not  a  deliberate  effort  to  conceal  how 
small  a  part  of  the  national  income  goes  to  those  who  work 
for  a  wage  or  small  salary — the  non-investors.'  But  what¬ 
ever  the  concealed  motive  or  hidden  purpose,  the  fact  is 
glaring — the  statistics  speak  for  themselves ;  wages  and  sal¬ 
aries  are  merged;  and  “salaries”  includes  the  salaries  of 


The  National  Income 


171 


clerks  and  officials.  Table  21  is  utterly  worthless  for  the 
purpose  of  determining  what  portion  of  the  national  income 
goes  to  the  wage  earners. 

Untangling  a  Skein  of  Statistics 

But  let  us  make  an  attempt  at  approximation  by  com¬ 
puting  some  of  the  pertinent  statistics  given  in  Table  22 
for  the  year  1918. 

From  the  statistics  for  Farmers  we  discover  that  the 
aggregate  income  of  4,433,000  farmers,  having  an  income 
of  less  than  $2000  a  year,  was  $4,600,000,000,  (or  $1038 
per  farmer).  The  aggregate  income  of  2,008,000  farmers 
having  an  income  of  more  than  $2000  a  year  was  $6,300,- 
000,000,  (or  $3137  per  farmer).  Consequently  the  farm¬ 
ers’  share  of  the  income  was  $10,900,000,000,  (or  an  average 
of  $1676  per  farmer). 

From  the  statistics  “all  income  receivers  except  farm¬ 
ers,”  (Table  22),  we  learn  that  the  aggregate  income  of 
30,450,000  persons  having  an  income  of  less  than  $2000  a 
year  was  $32,100,000,000,  (or  $1054  per  person). 

The  aggregate  income  of  3,400,000  persons  having  an 
income  of  more  than  $2000  a  year,  was  $17,400,000,000,  or 
$5118  per  person. 

Here,  then,  we  have  three  groups:  1.  Farmers;  2.  Those 
whose  income  was  less  than  $2000;  and,  3.  Those  whose 
income  was  more  than  $2000.  Counting  those  whose  income 
fell  below  $2000  generally  as  wage  earners,  and  those  whose 
income  exceeded  $2000  as  constituting  the  investor  group, 

we  get  the  following  result:  Average 

Total  number  Aggregate  income  per  person 


Farmers  . . .  6,441,000  $10,900,000,000  $1676 

Wage  earners .  30,450,000  32,100,000,000  1054 

Investors .  3,400,000  17,400,000,000  5118* 


40,291,0003  $60,400,000,000 

3  It  is  only  fair  to  say  that  the  economists  who  compiled  these 
statistics  included  among-  those  employed  2,500,000  soldiers,  sailors 
and  marines,  to  each  of  whom  they  generously  allotted  an  average 
income  of  $700,  or  a  total  of  $1,750,000,000. 

4  It  is  interesting  to  note  here  that  in  1918,  according  to  Table  27 
in  the  same  work  (p.  136)  only  842,458  persons  in  the  United  States 
had  an  income  of  more  than  $5000  a  year.  Who  can  reconcile  these 
statistical  contradictions?  I  confess  my  inability. 


172 


The  New  Capitalism 


The  Average  Income  Per  Family 

So  far,  so  good !  But  when  we  try  to  reduce  the  income 
of  the  forty  million  persons  to  a  family  basis,  we  discover 
that  there  is  something  fundamentally  wrong  somewhere. 
In  1918  the  population  was  105,000,000,  (21  million  fam¬ 
ilies).  If  we  consider  each  farmer  and  each  investor  as  the 
head  of  a  family  of  five,  these  two  groups  account  for  about 
fifty  million  persons,  or  approximately  ten  million  families. 
This  would  leave  fifty-five  million  persons,  or  eleven  million 
families,  as  constituting  the  wage-earner  group.  Of  these 
fifty-five  million,  it  would  appear,  30,450,000  were,  in  1918, 
engaged  in  gainful  occupations  (or  about  2.77  persons  per 
family)  which  wrould  yield  an  income  of  $2918  per  wage- 
earner  family;  w5 * 7hich  is  preposterous. 

To  the  credit  of  economists  be  it  said  that  none  has  ever 
statistically  allocated  so  handsome  an  “ average  income” 
to  the  wage-earner  families — not  even  figuring  into  the 
income  account,  sunsets  and  housewives’  imaginary  wages, 
and  lumping  “wages  and  salaries”  as  is  their  custom.  It 
must  be  admitted  that  they  have  been  fairly  conservative, 
as  may  be  judged  from  the  following  statistics  appearing 
in  Professor  King’s  tables  (p.  128  and  p.  169). 

Family  Income  Average  Money  Wage 

in  Dollars  per  employee,  per  annum 


1850 .  535  $204 

1860 .  613  265 

1870 .  889  397 

1880 .  735  323 

1890 .  941  398 

1900 .  1109  417 

1910 .  14945  507 


All  through  the  war  the  average  income  per  family  was 
estimated  between  $1500  and  $1850.  Let  us  adopt  the 
latter  figure  for  the  present.  In  the  course  of  the  past 

5  From  Professor  King's  Table  XLIV  (p.  228)  we  learn  that  in 

1910  over  half  (’51.54  percent)  of  the  families  in  the  United  States 
had  an  income  of  less  than  $800  a  year;  11.89  percent  had  an  income 
between  $800  and  $1000  a  year;  and  12.26  percent  had  an  income 
between  $1000  and  $1200.  In  other  words,  in  1910,  over  eighty  percent 

(81.69  percent)  of  the  families  in  the  United  States  had  an  income 
of  $1200  or  less. 


The  National  Income 


173 


few  years  I  have  read  a  number  of  articles  speaking  dis¬ 
paragingly  of  the  statistical  average  family,  and  their  sta¬ 
tistical  average  income.  An  anonymous  writer  in  The 
Saturday  Evening  Post  not  long  ago,  was  particularly  sar¬ 
castic  in  his  remarks.  I  share  the  anonymous  author’s 
objection  to  the  statistical  average  family  income,  but  for  a 
different,  reason.  My  objection  is  that  the  average  is  ob¬ 
tained  by  dividing  the  total  wages,  salaries  and  compensa¬ 
tion  of  all  those  listed  as  “  engaged  in  the  gainful  occupa¬ 
tions”  equally  among  all  the  families.  Consequently  a 
large  number  of  families,  whose  actual  income  falls  con¬ 
siderably  below  $1850  a  year,  are  made  statistical  sharers 
in  wages  and  salaries  they  do  not  receive;  whereas  thou¬ 
sands  whose  income  exceeds  from  ten  to  a  hundred  times, 
and  a  thousand  times  $1850,  statistically  are  placed  in  a 
class  to  which  they  do  not  belong. 

It  is  well  to  remember  here  that  in  1918  less  than  twelve 
percent  of  those  engaged  in  gainful  occupations  filed  an 
income  tax  report.  If  the  statistical  $1850  “average  income 
per  family  ’  ’  is  unfair,  as  the  anonymous  contributor  to  The 
Saturday  Evening  Post  would  have  us  believe,  it  is  unfair 
only  to  the  millions  of  families  whose  actual  income  falls 
below  $1850. 

But  if  the  statistical  “average  income  per  family”  was 
as  high  as  $1850  in  1918-1920,  the  average  is  not  $1850  at 
present,  for  the  group  of  wage  earners  and  salaried  men 
and  women.  Their  theoretical  participation  in  the  statis¬ 
tical  $1850  annual  income  was  temporary,  lasting  less  than 
three  years,  and  has  been  utterly  destroyed  by  material 
decreases  in  wages  and  salaries,  to  say  nothing  of  loss  of 
wages  on  account  of  unemployment,  or  actual  loss  through 
enforced  idleness,  during  the  two  years  following  the 
armistice. 

But  whatever  may  be  the  portion  of  the  national  income 
that  goes  to  the  wage  earner  or  non-investor  families,  never 
forget  that  little  or  none  of  it  is  in  their  possession  at  the 
end  of  the  year.  Their  necessary  living  expenses  consume 
their  gross  income. 


174 


The  New  Capitalism 
The  Investor’s  Share 

Not  so  with  the  investor  group.  According  to  the  statis¬ 
tics  given  in  this  chapter,  3,400,000  persons  had  an  income 
in  1918  totaling  $17,400,000,000.  Let  us  say  that  this 
amount  represents  the  income  of  the  investor  group.  How 
was  it  distributed?  The  statisticians  are  silent.  We  must 
therefore,  make  our  own  deductions.  What  part  of  this 
stupendous  sum  went  to  the  bona  fide  small  investors? 
Again  there  are  no  statistics.  Shall  I  say  ten  percent,  or 
$1,740,000,000  ?  I  doubt  it !  But  if  you  think  otherwise  you 
may  double  or  treble  this  amount.6 

In  Chapter  V,  you  may  recall,  I  set  aside  one  million 
investors  “  whose  investments  are  in  things  other  than  the 
securities  of  corporations.”  What  part  of  the  $17,400,- 
000,000  went  to  them  ?  Who  can  tell  ?  And  what  part  went 
to  the  speculative  investors?  Does  anyone  know? 

Of  one  thing  we  are  quite  certain,  and  that  is  that  the 
lion’s  share  of  the  $17,400,000,000  income  went  to  the  four 
hundred,  or  four  thousand  (or  forty  thousand,  or  four 
hundred  thousand,  if  you  prefer),  who  derive  enormous 
incomes  from  many  principal  sources : 

1 :  From  the  Banks. 

2 :  From  the  Insurance  Companies. 

3 :  From  the  Railroad  and  Transportation  Systems. 

4:  From  the  Public  Utilities. 

5 :  From  their  Monopoly  of  the  Raw  Materials  and 
Natural  Resources. 

6 :  From  their  Control  of  the  Leading  Industries. 

7 :  From  Stock,  and  Board  of  Trade,  Transactions. 


6  Let  those  who  may  be  tempted  to  double  or  treble  the  amount 
of  income  of  the  bona  fide  small  investors  remember  that  $1,740,000,000 
is  six  percent  on  twenty-nine  billion  dollars.  Or  let  them  take  a  glance 
at  the  Stockholders  Statistics  appearing  in  the  Annual  Report  (1921  of 
the  American  Telephone  and  Telegraph  Company — a  typical  corpo¬ 
ration)  according  to  which  there  were  186,342  shareholders  of  record 
on  December  31,  1921.  Of  this  number  63,857  held  five  shares  or  less; 
and  84,134  between  five  and  twenty-five  shares.  These  are  the  small 
stockholders.  In  the  A.  T.  and  T.  Co.,  128,000  employees  are  stock¬ 
holders. 


The  National  Income 


175 


Concealed  Incomes 

But  in  addition  to  the  $17,400,000,000  of  admitted  income 
there  are  concealed  incomes,  which  are  in  reality  profits 
camouflaged  as  expenses,  reserves,  etc.  For,  just  as  it  was 
necessary  to  disguise  the  crime  of  overcapitalization  (i.e. 
capitalizing  profits)  by  the  invention  of  some  euphonious, 
indefinite  phrases,  such  as  “ merger  value,”  “combination 
value,  ”  “  earning  power,  ”  “  good  will,  ’  ’  etc.,  it  was  found 
necessary  to  invent  accounting  and  cost  systems  to  camou¬ 
flage  the  reprehensible  Capitalistic  practices  and  particu¬ 
larly  to  conceal: 

1 :  That  the  profits  are  vast — considerably  greater  than 
six  percent  even  on  the  inflated  capitalization. 

2 :  That  the  bona  fide  small  investor  does  not  participate 
appreciably  in  their  distribution. 

3 :  That  the  enormous  profits  are  extorted  from  the  gen¬ 
eral  public — principally  the  wage  earners — the  non¬ 
investors. 

Capitalistic  Accounting  and  Cost  Systems 

The  scientific  accounting  and  cost  systems,  devised  by 
some  of  the  acutest  minds,  are  still  in  a  state  of  evolution ; 
they  are  being  revised,  amended,  and  improved  constantly. 
Books  and  special  periodicals  dealing  with  the  fine  and 
subtle  points  of  accounting,  are  published  in  increasing 
number.  Nearly  all  of  the  colleges  and  universities  have 
special  accounting  courses.  In  brief,  the  highly  scientific 
Capitalistic  accounting  and  cost  systems  are  now  in  general 
use;  even  concerns  and  individuals  that  cannot  be  said  to 
be  a  component  part  of  the  Capitalistic  System  have  adopted 
them,  for  their  great  benefit  to  those  who  employ  them  can¬ 
not  be  denied.  No  question  is  ever  raised  regarding  their 
validity,  their  fairness,  or  their  justice. 

As  a  matter  of  fact  most,  if  not  all,  of  the  big  corpora¬ 
tions,  keep  two  sets  of  books — one  for  those  on  the  inside, 
showing  the  actual  condition  and  earnings — and  another 
for  the  stockholders  and  the  benefit  of  the  public.  This  sys- 


176 


The  New  Capitalism 


tem  of  keeping  two  sets  of  accounts  was  brought  out  in  a 
number  of  the  federal  inquiries  held  at  different  times 
during  the  past  dozen  years. 

Capitalistic  Secret  Reserves 

But  I  have  no  desire  to  enter  into  a  discussion  of  account¬ 
ing  and  cost  systems,  their  principles,  subtleties  and  tech¬ 
nicalities.  Therefore  I  shall  confine  myself  to  a  brief  gen¬ 
eral  discussion  of  a  few  of  the  camouflaging  practices,  or 
rather  devices,  now  almost  universally  employed  and  con¬ 
sidered  entirely  legitimate — devices  which  serve  the  triple 
purpose  of  keeping  prices  at  a  high  level;  pre-empting  a 
goodly  percentage  of  the  profits  for  themselves ;  and  exclud¬ 
ing  the  bona  fide  stockholders  from  participation  therein. 

I  will  not  particularly  dwell  on  the  items :  interest ;  fixed 
charges;  overhead  expense;  maintenance  expense;  salaries 
of  officers ;  and  sundry  items  calculated  to  keep  production 
cost  at  the  highest  possible  notch,  for  I  am  at  this  moment 
dealing  with  concealed  profits,  not  with  the  cost  raising 
devices. 

The  devices  that  conceal  profits  are  the  several  secret 
reserves.  But  let  an  authority  on  accounting  explain  them  : 

‘  ‘  Secret  reserves  may  take  several  forms,  as  writing  down 
to  a  comparatively  small  figure  valuable  assets,  providing 
excessive  depreciation,  providing  excessive  reserves  for  bad 
debts,  or  contingencies,  valuing  stocks  of  materials  and 
products  on  hand  at  values  largely  belowT  either  cost  or 
market,  or  including  special  reserves  for  future  contingen¬ 
cies  under  the  head  of  accounts  payable.  Inasmuch  as  the 
majority  of  industrial  corporations  do  not  publish  their 
gross  earnings,  such  reserves  can  easily  be  made,  and  are 
made  continually  in  a  form  in  which  they  do  not  appear  in 
any  way  in  the  published  accounts,  and  are  known,  there¬ 
fore,  only  to  the  directors  and  managers.’’7 

7  From  “Accounting'  Practice  and  Procedure,”  by  Arthur  Lowes 
Dickinson,  “Balance  Sheet  Liabilities,”  Chapter  VI,  p.  151. 


The  National  Income 


177 


A  Concrete  Example 

I  can  best  illustrate  the  principle  involved  by  giving  an 
actual  example.  John  Skelton  Williams,  at  the  time  Comp¬ 
troller  of  the  Currency  in  his  letter  to  Elbert  Gary,  speak¬ 
ing  of  the  1918  report,  said  that  the  United  States  Steel  Cor¬ 
poration  ’s  net  earnings  amounted  to  $549,180,000,  but  made 
deductions  which  left  net  earnings  of  only  $274,603,000. 
“This  deduction,”  said  Mr.  Williams,  “included  an  item 
of  $96,675,000  for  maintenance  and  repairs,  though  the 
company  was  carrying  on  its  books  to  the  credit  of  ‘depre¬ 
ciation  and  extraordinary  replacement’  the  impressive  sum 
of  $191,281,000.” 

And  this  sort  of  thing,  mind  you,  has  been  going  on  for 
a  quarter  of  a  century.  I  do  not  know — I  cannot  esti¬ 
mate — how  many  billions  of  dollars  of  concealed  profits  in 
the  aggregate  have  been  diverted  by  corporations,  man¬ 
agers,  owners  and  officials  into  the  coffers  of  a  few  thousand 
constituting  the  “inner  circle”  of  the  Capitalistic-Mam- 
monistic  group.  My  guess  is  that  several  billions  a  year 
are  thus  “set  aside.”  And  I  believe  it’s  a  conservative 
guess.  I  do  not  think  that  I  am  unfair  to  the  Capital¬ 
istic  “investor”  group  when  I  say  that  in  addition  to  its 
admitted  income  of  $17,400,000,000  in  1918,  it  can  be  cred¬ 
ited  with  an  “income”  of  several  billions  of  concealed 
profits.  But  whatever  the  actual  figures — the  fact  cannot 
be  denied. 

The  Established  Order 

All  the  available  statistics  with  regard  to  wealth  and 
income  establish  one  thing  beyond  the  shadow  of  a  doubt, 
namely — the  concentration  of  wealth  in  the  hands  of  a  few. 
This  is  not  exactly  a  phenomenon,  for  “  ’twas  ever  thus,” 
even  'from  the  beginning.  Indeed  the  concentration  of 
wealth  in  the  hands  of  a  few  was  for  centuries  practically 
accepted  by  the  masses  as  a  matter  of  course.  Moreover, 
they  believed  that  they  were  helpless  to  alter  it. 

But  during  the  past  century  tremendous  changes  have 


178 


The  New  Capitalism 


taken  place  in  the  world.  The  masses  are  no  longer  dis¬ 
posed  to  contemplate  the  continued  process  of  concentration 
with  patient  indifference.  For  a  hundred  years  they  have 
been  more  or  less  insistently  asking  a  hundred  questions 
which  may  be  summarized  thus :  ‘ 1  Why  should  a  favored 
few  garner,  or  be  permitted  to  garner,  all  the  riches  of  the 
earth ;  to  accumulate  for  themselves  all  the  wealth,  and  the 
manifold  blessings  and  advantages  that  (real  or  fancied)  the 
possession  of  wealth  implies  or  is  supposed  to  imply.  Why 
should  they  be  permitted  to  own  and  to  acquire  all  the  prop¬ 
erties  from  which  wealth  is  derived?  Why  should  they  be 
permitted  to  practically  confiscate  for  their  own  private  en¬ 
richment  the  resources  which  Nature  gave  to  all  the  people? 
WTiy  should  we,  year  after  year,  sweat  and  toil,  labor  and 
slave,  merely  for  them?  Why  are  they  and  they  alone 
entitled  to  the  usufruct  of  our  labor?  We  are  no  longer 
satisfied  with  a  bare  living ;  we  want  a  greater  share  of  the 
wealth  we  produce,  and  which  is  markedly  swelling  the  cof¬ 
fers  of  those  who  already  have  vastly  more  than  they  need, 
and  more  than  is  good  for  them,  or  for  us.  This  concentra¬ 
tion  of  the  country’s  wealth  is  wrong;  it  is  an  injustice,  and 
it  must  cease.” 

And  hundreds  of  more  or  less  capable  thinkers  and  writ¬ 
ers  have  tried  to  answer  these  questions  more  or  less  intelli¬ 
gently,  more  or  less  intelligibly,  while  thousands  of  others 
have  come  to  the  defense  of  what  it  pleases  them  to  call 
“the  established  order.” 

Thus  far  the  advocates  of  “the  established  order”  have 
been  victorious — the  concentration  of  wealth  in  the  hands 
of  the  few  continues,  and  is  a  demonstrable  fact.  But  it  is 
becoming  increasingly  clearer  to  those  not  entirely  blind, 
that  “the  established  order”  is  by  no  means  the  accepted 
order;  indeed  is  being  rejected  by  a  continuously  increas¬ 
ing  number.  The  end  of  the  “established  order”  is  ap¬ 
proaching. 


CHAPTER  XV 


■  ■ 


“ Labor,  Capital  and  Brains” 

IN  October,  1920,  the  American  Bankers ’  Association 
held  its  forty-sixth  annual  Convention  in  Washing¬ 
ton,  D.  C.  In  its  report  the  Committee  on  Resolutions1 * 
‘  ‘  fully  realizing  that  a  special  duty  devolves  at  this  time  on 
the  bankers  of  this  country  to  aid  as  best  they  may  in  meet¬ 
ing  conditions  and  solving  problems  with  a  view  to  the 
welfare  of  the  nation”  (meaning,  of  course,  their  own  wel¬ 
fare)  declared  itself  as  follows: 

“  With  special  emphasis  we  would  call  the  attention  of 
labor  to  the  essential  unity  of  the  three  great  elements 
entering  into  the  industrial  structure,  labor,  capital  and 
brains.  A  fair  balancing  of  interest  between  these  factors 
in  production  of  wealth  must  be  maintained  to  insure  their 
common  prosperity.  Failure  to  recognize  this  balance 
may  easily  wreck  industry,  and  we  call  upon  each  factor 
involved  to  recognize  this  basic  truth, 9  ’  etc. 

The  Slogan 

“ Labor,  Capital  and  Brains.”  This  is  the  new  substi¬ 
tute  for  that  other  slogan,  “Labor,  Capital  and  Manage¬ 
ment,”  which  for  a  while  was  freely  employed  by  writers 
and  speakers — the  valiant  apologists  for,  and  defenders  of, 
the  Capitalistic  Entrepreneur  System.  But  “Labor,  Cap¬ 
ital  and  Management”  was  so  clearly  an  absurdity — Capital 
and  Management  could  easily  be  shown  to  be  in  all  cases 
identified — one  and  the  same  thing — cut  out  of  the  same 
piecer  of  cloth — that  it  has  now  practically  disappeared 
from  the  writings  and  utterances  of  those,  who,  by  pen  or 

i  See  Journal  of  the  American  Bankers  Association,  November,  1920, 

page  289. 


179 


180 


The  New  Capitalism 


word  of  mouth,  discoursed  in  favor  of  the  Capitalistic 
Entrepreneur  System.  In  every  instance  Capital  and  Man¬ 
agement  are  synonymous,  and  the  two  in  deadly  unison  are 
arrayed  against  Labor. 

The  same  can  be  said  of  the  new  version,  “Labor,  Cap¬ 
ital  and  Brains.”  Like  Capital  and  Management,  Capital 
and  Brains  are  one  and  the  same  thing.  The  same  indi¬ 
viduals  who  control  capital  are  also  considered  ipso  facto 
the  possessors  of  brains — the  sole  possessors,  the  sole  inher¬ 
itors  of  that  rare  thing.  The  two — Capital  and  Brains — 
are  an  interlinked  unit — a  solid  phalanx  arrayed  against 
Labor. 

The  Propaganda 

The  slogan  is  not  new ;  it  was  not  invented  by  the  Reso¬ 
lutions  Committee  of  the  American  Bankers’  Association; 
it  has  been  current  for  some  time.  But  the  Bankers’  Asso¬ 
ciation  has  infused  into  it  the  breath  of  vitality.  It  will 
become  more  conspicuous.  We  will  probably  hear  it  repeat¬ 
edly  from  now  on,  for  the  Public  Relations  Committee 
of  the  American  Bankers’  Association  at  the  same  time 
reported  that : 

“More  than  650  of  the  leading  newspapers  of  the  country 
have  been  supplied  every  two  weeks  with  bulletins  contain¬ 
ing  news  of  banks  and  the  association.  The  editors  have 
been  exceptionally  responsive.”  .  .  . 

“Nearly  a  hundred  financial  papers  and  writers  have 
received  a  weekly  news  service.  These  editors  have  re¬ 
sponded  in  a  most  wholesome  fashion.  .  .  . 

“Public  opinion,  that  elusive  mistress  of  fortune,  is 
courted  assiduously  these  days  with  various  forms  of  public 
relation  by  people  in  all  walks  of  life,  and  is  recognized  in 
the  constructive  efforts  of  most  all  organizations,”  etc. 

In  an  article  in  the  North  American  Review  (March, 
1921)  entitled  “The  New  Socialism,”  by  John  Corbin,  we 
find  the  new  idea  as  exemplified  in  the  slogan  “Labor, 
Capital  and  Brains”  neatly  interpreted.  “In  the  realm  of 
industry,”  writes  Corbin,  “there  is  more  than  labor,  more 


“Labor,  Capital  and  Brains” 


181 


than  capital — more  than  the  two  combined  and  eager  to 
work  in  harmony.  The  body  and  the  members  are  power¬ 
less  without  the  brain  that  is  strong  and  clear — force  to 
lead,  and,  when  need  is — to  rule.” 

The  Capitalistic  Claimants 

Probably  before  this  book  of  mine  is  completed  I  will  run 
across  many  repetitions  and  paraphrases  of  the  new  slogan, 
“ Labor,  Capital  and  Brains.”  In  the  meantime  let  us 
analyze  it  briefly.  In  the  minds  of  those  who  will  employ 
it,  Capital  and  Brains  will,  of  course,  always  mean  one  and 
the  same  thing.  They  will  never  associate  Brains  wdth 
Labor.  It  will  be  assumed  that  only  the  Capitalistic  Entre¬ 
preneurs  have  Brains;  by  no  process  of  reasoning  will 
‘‘Brains”  ever  be  conceded  to  reside  in  any  other  head. 
Only  into  the  Capitalistic  cranium  has  the  Creator  injected 
Brains.  In  the  opinion  of  Capitalistic  Entrepreneurs  the 
“brains”  in  a  calf’s  head  are  superior  to  those  in  Labor’s 
head,  for  they  can,  at  least,  be  scrambled.  By  “Brains”  is 
meant  a  superior  intelligence — ability,  talent,  genius — a 
sort  of  “divine  right.”  The  Capitalistic  group  alone,  it 
would  seem,  has  intelligence,  ability,  talent,  genius.  Cap¬ 
italistic  “Brains”  is  a  wonderful  thing  in  nature. 

Yet  all  the  great  inventions  and  discoveries  were  made, 
not  by  the  Capitalistic  confraternity,  but  by  workers,  men 
who,  while  working  for  a  wage  in  shop  or  factory,  or  at  the 
bench;  or  in  their  moments  of  studious  leisure,  pondered 
over  the  mysterious  principles  of  their  branches  of  labor, 
and  devoted  their  best  energy  to  the  mastery  of  principles 
and  technique — invented  machines,  improved  them,  per¬ 
fected  them,  and  the  sum  total  of  whose  multiplied  benefits 
today  constitute  the  principal  asset,  capital,  wealth — and 
the  chief  means  of  enrichment,  of  the  Capitalistic  group. 

If  it  served  any  other  purpose  than  to  show  the  utter 
stupidity  of  the  new  slogan,  and  thus  stultify  the  Capital¬ 
istic  crowd,  I  should  like  to  give  over  a  chapter  or  two  of 
this  book  to  a  brief  paragraphic  record  of  some  of  the  most 
important  achievements  in  the  field  of  inventions  and  dis- 


182 


The  New  Capitalism 


coveries,  beginning,  let  us  say,  with  Richard  Arkwright, 
inventor  of  the  spinning  jenny. 

Such  a  record  would  establish  beyond  cavil  or  dispute, 
that  if  brains  had  not  resided  in  bountiful  quantities  in 
ordinary  heads,  the  Capitalistic  brain  today,  assuming  that 
it  would  have  the  ability  to  function  at  all,  would  die  of 
inanition.  It  is  because  there  was  a  high  quality  of  brains 
developed  long  prior  to  and  entirely  independent  of  the 
Capitalistic  Entrepreneur  System,  that  the  sundry  indi¬ 
viduals  constituting  the  Capitalistic  Entrepreneur  group 
owe  their  success  and  fortune.  Has  J.  Pierpont  Morgan 
added  anything  to  the  sum  and  substance  of  human  happi¬ 
ness?  For  what  great  mechanical  invention  is  Elbert  Gary 
conspicuous  in  the  eyes  of  the  world?  We  speak  of  Besse¬ 
mer  steel,  but  “lo  and  behold  ye” — the  Bessemer  process 
was  not  invented  by  Sir  Henry  Bessemer,  but  by  William 
Kelley,  an  iron  maker  of  Eddyville,  Kentucky,  whose  ex¬ 
perimentations  antedated  Bessemer’s  by  nearly  ten  years. 
Both  Bessemer ’s  and  Kelley ’s  processes  would  have  yielded 
no  practical  results  but  for  the  discoveries  of  Mushet  and 
Gorannson,  particularly  the  former ’s.  But  ‘  ‘  Mushet ’s  Brit¬ 
ish  patents  lapsed,  and  became  public  property,  owing  to 
his  poverty  and  other  unfortunate  circumstances.  ’  ’  Mushet 
died  ‘  ‘  poor  and  unknown,  while  Bessemer  was  knighted  by 
Queen  Victoria  for  his  invention  and  received  royalties 
aggregating  $500,000  a  year.”2 

Calling  the  Turn 

Nearly  ten  years  ago  the  Capitalistic  group  (or  more 
accurately  speaking  the  dominant  heads  of  the  Capitalistic 
Entrepreneur  banking  group)  sought  to  win  for  themselves 
the  unstinted  applause  of  the  world  for  their  wonderful 
“brains.”  Louis  D.  Brandeis  treats  of  it  in  an  interesting 
chapter3  in  his  book  “Other  People’s  Money.’’  He  tells  us 
that  J.  P.  Morgan  &  Co.,  declared  in  a  letter  to  the  Pujo 

2  “The  Marvels  of  Modern  Mechanism,"  by  Jerome  Bruce  Crabtree, 
p.  333. 

3  “Big-  Men  and  Little  Business,"  page  135. 


“Labor,  Capital  and  Brains’ ’ 


183 


Committee  that  ‘  4  practically  all  the  railroad  and  industrial 
development  of  this  country  has  taken  place  initially 
through  the  medium  of  the  great  banking  ho  uses/ 1 

And  then  Mr.  Brandeis  proceeds  to  show  that  just  the 
reverse  is  true,  that  4  4  nearly  every  such  contribution  to  our 
comfort  and  prosperity”  was  “initiated  without  their  aid,” 
and  it  was  not  until  after  success  had  been  attained,  or  ‘  4  the 
possibility  of  success  had  been  demonstrated,”  or  not  until 
‘  4  the  funds  of  the  hardy  pioneers,  who  had  risked  their  all, 
were  exhausted,”  that  the  financial  “brains”  came  “into 
relation  with  these  enterprises.” 

4  4  This  is  true  of  our  early  railroads,  ’  ’  writes  Mr. 
Brandeis,  4  4  of  our  early  street  railways,  and  of  the  automo¬ 
bile  ;  of  the  telegraph,  the  telephone  and  the  wireless ;  of  gas 
and  oil ;  of  harvesting  machinery,  and  of  our  steel  industry ; 
of  the  textile,  paper  and  shoe  industries ;  and  of  every  other 
important  branch  of  manufacture.”  And  in  support  of 
his  contention  he  gives  the  pertinent  facts  with  regard  to 
the  industries  mentioned. 

“By  Their  Works  Ye  Shall  Know  Them” 

Capital  and  Brains ! — leaving  Labor  for  the  moment 
entirely  out  of  the  equation,  Capital  and  Brains  forsooth! 
At  this  very  moment  the  country  is  in  industrial  turmoil 
and  economic  upheaval,  thanks  to  the  Capitalistic  Entre¬ 
preneur  System  evolved  by  Capitalistic  Entrepreneur 
brains.  For  nearly  two  years  the  Great  Industries  were 
practically  at  a  standstill,  and  millions  of  workers  out  of 
employment  or  working  only  part  time.  According  to  the 
balance  sheets  of  some  of  the  leading  corporations — in  spite 
of  the  tremendous  increase  of  business  and  the  greatly 
increased  prices,  and  enormous  profits  reaped  during  the 
past  twenty  years,  they  were  on  the  verge  of  bankruptcy. 
Some  of  them  saved  themselves  by  4  4  reorganization  ’ 1 
schemes,  evolved  by  Capitalistic  4 4 brains” — by  the  flotation 
of  more  and  more  watered  stocks,  and  bond  and  note  issues. 


184 


The  New  Capitalism 


“A  Modern  Instance ” 

In  February,  1921,  W.  W.  Atterbury,  Vice  President  of 
what  is  presumably  the  most  prosperous  railroad  system  in 
the  country,  made  the  statement  that  practically  all  the 
railroads  are  insolvent,  and  more  than  intimated  that  the 
only  thing  that  can  save  them  from  disaster  is  to  cut  down 
the  wages  of  railroad  employees. 

On  September  26,  1921,  Mr.  Atterbury  told  the  members 
of  the  Mutual  Benefit  Society  of  the  road,  which  met  in 
Philadelphia  on  that  date,  that  wages  must  come  down  or 
the  roads  would  be  forced  into  Government  control,  or 
receiverships. 

“It  is  true,”  he  said,  “there  isn’t  much  left  for  a  further 
reduction  in  wages,  and  it  isn’t  pleasant  to  hear  or  contem¬ 
plate;  but  there  faces  us  either  reduction  or  receivership.”4 

For  many  years  the  railroads  have  been  in  a  notoriously 
bad  condition.  Many  of  them  have  gone  through  the  hands 
of  receivers.  At  the  time  of  the  war,  when  the  Government 
took  them  over,  some  of  the  important  railroad  properties 
were  in  a  dilapidated  condition.  To  rehabilitate  them  it 
was  necessary  to  provide  funds  borrowed  from  the  non- 
investor  public.  And  even  when  the  roads  were  turned 
back  it  was  found  imperative  to  supply  the  roads  with  addi¬ 
tional  funds,  borrowed  from  the  non-investor  public,  besides 
passing  a  law  guaranteeing  returns  to  the  “investors”  in 
railroad  “securities.”  And  yet  the  Capitalistic  Entrepre¬ 
neurs  dare  to  shout  “over  the  roofs  of  the  world”:  “With 
special  emphasis  we  would  call  the  attention  of  labor  to  the 
essential  unity  of  the  three  great  elements  entering  into  the 
industrial  structure,  labor,  capital  and  brains.” 

“Whom  the  Gods  Woidd  Destroy” 

A  peculiar  symptom  of  madness — a  sort  of  ‘  *  divine 
right”  lunacy,  is  beginning  to  manifest  itself  among  the 
self-appointed  trustees  of  the  nation’s  wealth — those  who 
have  deluded  themselves  into  the  belief  that  “capital  and 


4  Chicago  Tribune,  September  27,  1921. 


“Labor,  Capital  and  Brains” 


185 


brains”  are  theirs  by  ordination  of  Providence — that  they 
are  financial  and  industrial  supermen,  set  apart  and  above 
ordinary  men,  endowed  with  supreme  intelligence,  wisdom 
and  authority,  and  that  as  a  sacred  duty  which  they  are 
beginning  to  construe  as  a  divine  right,  it  behooves  them  to 
exercise  their  superior  prerogatives  by  assuming  not  only 
IDolitical  dictatorship  in  the  nation,  but  also  leadership  over 
citizens,  controlling  their  conduct,  regulating  their  pleas¬ 
ures,  formulating  their  thoughts  and  directing  their  opin¬ 
ions.  Books,  magazine  articles  and  editorials  have  been 
written  in  which  this  lunacy  is  clearly  apparent.  A  brief 
excerpt  from  an  article  written  by  a  man  who,  by  virtue  of 
his  position  as  Vice  President  of  one  of  New  York’s  largest 
Capitalistic  banks  can  be  said  to  speak  as  one  inspired,  will 
suffice  to  give  color  to  my  comment: 

“The  leaders  and  managers  of  American  industry,  the 
men  who  by  reason  of  their  abilities  hold  the  positions  of 
power  and  influence  in  the  community,  must  accept  a 
greater  responsibility  for  the  common  welfare  than  they 
have  felt  in  the  past.  If  they  want  society  to  develop  a 
common  outlook  and  spirit  they  must  exert  themselves  to 
that  end.  They  must  show  that  spirit  themselves.  They 
must  show  themselves  outside  the  circle  of  their  own  private 
interests  and  identify  themselves  with  the  common  interests. 
They  must  help  give  that  direction  and  supervision  to  com¬ 
munity  interests  which  are  so  much  needed. 

“This  responsibility  they  must  take  whether  they  like  it 
or  not.  Whatever  goes  wrong  with  society  for  want  of 
intelligent  guidance  and  affects  the  living  conditions  of  the 
people  unfavorably,  reacts  upon  business.  The  average 
man  does  not  think  very  deeply  or  reflect  very  profoundly 
about  causes ;  he  judges  mainly  by  visible  results.  It  is  up 
to  th'em  to  show  the  common  man  how  to  be  efficient,  to 
make  him  prosperous,  and  to  satisfy  him  that  he  has  a  stake 
in  the  country.  It  is  squarely  up  to  them  to  win  the  confi¬ 
dence  of  the  masses.  Success  may  not  be  easy,  but  in  all 
fields  the  ability  to  overcome  obstacles  is  one  of  the  condi- 


186 


The  New  Capitalism 


tions  of  leadership.  The  man  who  cannot  measure  up  to 
the  requirements  simply  fails  as  a  leader,”  etc.5 

Or  as  John  Corbin  succinctly  put  it:  “The  body  and 
the  members  are  powerless  without  the  brain  that  is  strong 
and  clear — free  to  lead,  and,  when  need  is — to  rule.” 

The  Bourbonic  Plague 

Let  those  who  have  fallen  victim  to  the  Bourbonic  plague 
of  Capitalistic  hallucinations  hold  communion  with  them¬ 
selves  before  it  is  too  late.  Let  them  keep  in  mind  what 
mortal  illness  befell  those  nobles  who  suffered  from  similar 
delusions  around  A.D.  1789,  who,  we  are  told  by  Taine,  had 
arrogated  all  the  prominent  positions  in  the  Kingdom,  with 
all  the  advantages  accruing  thereto,  namely,  “authority, 
property,  honors,  or,  at  the  very  least,  privileges,  immun¬ 
ities,  favors,  pensions,  preferences  and  the  like.”  Let  us 
hope  that  our  modern  “nobles”  who  prate  of  “capital  and 
brains”  and  boast  of  their  superior  wisdom,  authority  and 
power  may  not  lose  their  senses  even  as  those  who  circa 
1789  imagined  they  were  made  of  a  superior  kind  of  clay, 
lost  their  heads. 

But  I  am  less  concerned  with  Capitalistic  Grossenwahn 
— the  Capitalistic  tendencies,  pretentions  and  boasts,  than 
I  am  with  what  applies  peculiarly  to  the  economic  life  and 
welfare  of  the  people ;  and  it  is  to  the  consideration  of  those 
particular  phases  of  my  subject  that  I  will  confine  myself 
in  this  chapter. 

Pouring  the  Oil  of  Fact  on  the  Waters  of 
Capitalistic  Conceit 

To  those  who,  like  George  E.  Roberts  and  others,  assume 
or  contend  that  “brains”  reside  only  in  the  heads  of  the 
Capitalistic  group;  and  that  business  ability  and  genius 
cannot  be  developed  in  anyone  not  of  the  Capitalistic  group, 
I  want  to  state  with  all  the  emphasis  possible  that — I  will 


5  Excerpt  from  “Wealth — Its  Use  and  Control,”  by  George  E. 
Roberts,  Vice  President,  National  City  Bank  of  New  York,  in  Adminis¬ 
tration,  The  Journal  of  Business  Analysis  and  Control,  January,  1921. 


“Labor,  Capital  and  Brains” 


187 


not  say  nine  times  ont  of  ten,  but  six  times  out  of  ten — in 
commercial  life  the  actual  work  is  done  by  the  men  in  the 
ranks,  but  the  credit  for  it  is  wholly  claimed  by  those  hold¬ 
ing  positions  of  power  and  influence.  Under  the  System 
devised  by  the  Capitalistic  group,  the  “underling”  has  no 
right  to  go  over  the  head  of  a  department ;  the  subordinate 
cannot  deal  directly  with  the  chief.  I  know  of  scores  of 
cases  where  foremen,  superintendents,  and  heads  of  depart¬ 
ments,  take  precious  good  care  that  no  report  of  merito¬ 
rious  or  extraordinary  work  done,  shall  reach  the  ears,  or 
fall  under  the  notice,  of  those  high  in  authority,  for  they 
are  jealous,  and  afraid  that  unusual  ability  on  the  part  of 
a  subordinate  might  usher  them  out  of  their  positions.  I 
know  of  cases  where  men  who  gave  evidence  of  possessing 
unusual  ability  and  honesty,  were,  under  one  pretext  or 
another,  persecuted,  or  summarily  dismissed.  Indeed  all 
the  “brains”  to  be  found  in  the  Capitalistic  Enterpreneur 
group  have  been  recruited  from  the  ranks  of  the  supposed 
brainless.  John  Oakwood,  in  an  article  in  The  Annalist 
(September  19,  1921)  said: 

“The  country’s  leading  banks,  say  those  with  resources 
of  $100,000,000  or  more,  nearly  as  many  of  which  are 
located  outside  of  New  York  as  are  in  the  metropolis,  are 
commanded  by  men  whose  average  age  is  about  fifty-five 
years,  who  on  the  average  have  been  in  banking  about 
thirty  years,  and  who,  in  the  great  majority  of  cases,  began 
as  messengers  or  clerks  and  have  worked  their  way  step  by 
step  in  the  practical  business  of  banking.  A  great  many 
more  of  them  were  born  in  small  towns  than  in  big  cities.  ’  ’6 

Or  listen  to  this  from  the  pen  of  Roger  W.  Babson : 

“Were  the  fathers  of  these  great  captains  of  industry 
college  graduates?  No.  Were  the  fathers  of  these  great 
captains  of  industry  bankers  ?  No.  Were  they  rich  manu¬ 
facturers  and  merchants?  No.  These  great  captains  of 
industry,  these  men  who  have  built  America ’s  greatest  rail¬ 
roads,  factories  and  stores,  are  the  sons  of  poor  parents — 

6  “No  Financial  Moses  Need  Apply,”  by  John  Oakwood,  in  The 
Annalist,  September  19,  1921. 


188 


The  New  Capitalism 


the  sons  of  farmers  and  ministers  and  wage  workers.  The 
statistics  of  this  particular  study  even  show  that  the  great 
majority  of  these  industrial  builders  were  the  sons  of  par¬ 
ents  whose  income  averaged  less  than  $1,200  per  year.  If 
the  captains  of  industry  of  the  last  quarter  of  a  century 
came  from  the  ranks  of  the  masses,  the  captains  of  industry 
of  the  next  quarter  of  a  century  are  going  to  come  from 
the  same  source.  The  bankers,  manufacturers,  and  mer¬ 
chants  of  the  next  generation  will  not  be  the  sons  of  the 
bankers,  manufacturers  and  the  merchants  of  today.  They 
will  be  the  sons  of  farmers,  professional  men  and  wage 
workers  of  today.”7 

The  Threefold  Intent  Behind  the  Slogan 

The  threefold  intent  of  the  Capitalistic  propaganda 
crystalized  into  the  slogan  “Labor,  Capital  and  Brains” 
is  clearly  apparent.  It  is  intended : 

1 :  To  impress  upon  the  public  mind  that  the  constituent 
members  of  the  Capitalistic  Entrepreneur  System  are 
entitled  to  immense  rewards  for  their  double  possession — 
Capital  and  Brains. 

2 :  To  send  the  lesson  home  to  those  who  work  for  a 
wage  that  if  it  were  not  for  the  Capitalistic  “brains” 
Labor  would  be  in  a  sorry  plight. 

3 :  To  convey  to  those  who  constitute  the  non-investor 
group  that  without  Capitalistic  “brains”  the  world  would 
be  in  a  sad  condition  and  surely  go  to  the  demnition  bow¬ 
wows. 

As  regards  the  first,  namely,  that  Capital  plus  Brains  is 
entitled  to  immense  rewards,  let  me  go  on  record  once  more 
as  saying  that  I  have  never  held  nor  contended  that 
“brains”  should  go  unrewarded.  There  are  those  who 
have  ten  talents  and  those  who  have  only  one  talent,  and  I 
contend  that  the  rewrard  should  always  be  commensurate 
and  liberal.  But  Capitalistic  Brains  does  not  seem  to  be 
satisfied  with  any  decent  reward — it  wants  it  all.  The 
combination  of  Capital  and  Brains  is  content  wfith  nothing 


7  Chicago  Daily  News,  July  16,  1921. 


“Labor,  Capital  and  Brains” 


189 


less  than  a  hundred  percent  return  on  its  supposed  double 
investment.  Look  at  the  statistics  for  Wealth  and  Income. 

Reflect  for  a  moment  on  the  fact  that  today  probably 
about  ten  percent  of  the  population  owns  ninety  percent 
of  the  country ’s  wealth.  A  rather  liberal  reward  consider¬ 
ing  that  as  a  rule  the  real  brains  were  furnished,  not  by 
the  Capitalistic  crowrd,  nor  members  of  their  families,  but 
by  generations  of  brain  owners  vested  in  the  garb  of 
workers. 

Let  me  ask  one  question  of  those  who  sing  the  siren  song 
“Capital  and  Brains.”  In  1918  the  admitted  Capitalistic 
emoluments  amounted  to  seventeen  and  a  half  billion. 
How  much  of  this  amount  was  a  distinct  return  on  Capital, 
and  how  much  on  Brains?  Or  do  the  two  constitute  an 
intimate,  endogenous,  inseparable  hermaphroditic  entity. 

With  regard  to  the  second  intent  concealed  within  the 
Capitalistic  slogan  “Capital  and  Brains” — let  me  quote  a 
statement  made  by  Charles  M.  Schwab : 

“The  pressure  of  large  amounts  of  capital  invested  in 
industry  does  not  crush  the  workingman.  On  the  con- 
traiy,  only  by  large  investments  can  the  prosperity  of  the 
workingman  be  furthered.” 

Indeed?  One  begins  to  wonder  how  workingmen  man¬ 
aged  to  get  along  before  industries  were  consolidated  and 
combined.  Surely  Mr.  Schwab  will  admit  that  workmen 
had  jobs  before  Capitalistic  Trusts  and  combines  were 
formed.  He  will  also  admit  that  industries  grew  and  flour¬ 
ished  in  the  years  antedating  the  origin  of  ‘  ‘  Big  Business.  ’  ’ 
I  should  like  to  see  him  prove  his  contention  that  “only 
by  large  investments  can  the  prosperity  of  the  workingman 
be  furthered.”  But  before  attempting  this  it  might  be  well 
for  Mr.  Schwab  to  read  the  report  of  The  Interchurch 
World'  Movement  Committee  on  the  steel  strike  of  1919. 

The  other  implication  that  those  who  labor  do  not  pos¬ 
sess  and  cannot  develop  “brains”,  I  have  already  suffi¬ 
ciently  answered  in  this  chapter.  But  for  emphasis  Ill 
add  that  there  are  thousands  of  men  in  the  ranks  every- 


190 


The  New  Capitalism 


where  who  have  great  executive  and  managerial  ability, 
ambition  and  initiative,  who  need  but  an  untrammelled 
opportunity  to  equal  and  surpass  many  of  the  men  holding 
positions  of  power  and  influence.  And  they  have — what 
many  Capitalistic  Entrepreneurs — chiefs,  executives  and 
managers  have  not — still  a  sense  of  honor  and  of  moral 
responsibility — a  conscience. 

My  answer  to  the  third  clear  intent  of  the  Capitalistic 
slogan,  “Capital  and  Brains,”  is  the  contents  of  this  book. 
I  grant  to  the  Capitalistic  Entrepreneurs  the  possession 
of  brains — but  brains  infected  with  maggots.  To  the  par¬ 
ticular  brand  of  Capitalistic  brains  we  not  only  can,  but 
must,  attribute  the  wretched  economic  condition  that  pre¬ 
vails  throughout  the  world  today. 

Who  is  responsible  for  the  steady  increase  in  the  cost  of 
living  during  the  past  twenty  years?  Who  is  responsible 
for  the  depreciation  of  the  wage  dollar.  Who  is  responsible 
for  the  decrease  in  the  purchasing  power  of  money  ?  Whom 
are  we  to  blame,  or  whose  praises  shall  we  sing,  for  the 
prolonged  business  stagnation,  and  for  the  unemployment 
of  millions  of  men  and  women? 

“Brains” 

Brains !  Ah,  yes,  it  is  a  very  remarkable  kind  of 
“brains”  that  can  originate  a  business  system  which  finds 
it  necessary  to  employ  three  dollars  of  capital  to  produce 
one  dollar’s  worth  of  goods;  a  very  special  kind  of 
“brains”  that  has  succeeded  in  developing  a  business  sys¬ 
tem  necessitating  the  borrowing  of  from  two  to  three 
dollars  where  formerly  one  sufficed;  a  most  extraordinary 
kind  of  “brains”  that  can  set  in  motion  and  keep  in  per¬ 
fect  running  order,  for  its  own  exclusive  benefit,  a  busi¬ 
ness  machine  that  compels  the  public  to  spend  from  three 
to  four  dollars  for  what  could  formerly  be  bought  for  one 
dollar. 

Hats  off,  ye  non-investors,  to  the  BRAINS  that  has  done 
all  this  for  you ! 


CHAPTER  XVI 
The  Shrinking  Dollar 


WE  have  heard  a  great  deal  within  the  last  decade  of 
the  shrinking  dollar,  as  if  the  dollar  were  compara¬ 
ble  to  the  modest  violet  shrinking  bhishingly 
from  view.  Why  call  it  a  shrinking  dollar,  since  there  are 
a  half  hundred  terms  that  would  more  aptly  describe  its 
evanescent  career?  For  example,  you  might  say  that  the 
dollar  of  today,  compared  with  the  dollar  of  former  years, 
is  lean,  or  shrivelled,  or  anemic,  or  emaciated,  or  attenuated, 
or  debilitated,  or  lacerated,  or  mutilated,  or  emasculated,  or 
sick,  or  stricken,  or  an  invalid,  or  devitalized,  or  incapaci¬ 
tated,  or  deteriorated,  or  depreciated,  or  depressed.  Any 
of  these  descriptive  terms — just  to  note  a  few — will  fit  the 
case  better  than  shrinking. 

But  the  economic  doctors  have  a  horror  of  calling  a  spade 
a  spade.  They  are  reluctant  to  call  things  by  their  right 
name.  Their  innate  modesty  does  not  permit  them  to  tell 
the  naked  truth ;  to  their  delicately  attuned  ears  the  truth 
is  bitter,  harsh,  ugly  and  repellant.  So  as  not  to  disturb 
the  peaceful  slumber  of  the  expectant  relatives,  they  prefer 
to  let  the  patient  writhe  in  pain  on  his  Procrustean  bed. 
And  so  they  prate  more  or  less  learnedly  of  the  “shrink¬ 
ing  dollar’ ’  rather  than  saying  in  so  many  words  that 
prices  have  gone  up;  and  that  the  going  up  of  prices  has 
necessarily  reduced  the  purchasing  power  of  the  dollar, 
depressed  its  value,  depreciating  it  calculably  by  precisely 
as  many  cents  as  prices  went  up. 

Depreciation  of  the  W age  Dollar 

In  1896  the  American  dollar  was  at  its  best — a  perfectly 
healthy  dollar;  it  was  worth  one  hundred  cents;  it  could 


191 


192 


The  New  Capitalism 


buy  a  maximum  quantity  of  goods.  Then  the  period  of 
overcapitalization  began.  Almost  immediately  prices  of 
commodities  began  to  ascend,  slowly  at  first,  but  surely. 
Taking  the  prices  of  1896  as  basic  wre  discover  that  for 
every  cent  of  increase  in  the  aggregate  prices  of  the  com¬ 
modities,  the  wage  dollar,  i.e.,  the  non-investor’s  dollar — 
went  down  by  one  cent  in  purchasing  power.  No  finer 
example  of  the  inverse  ratio  can  be  found  than  in  the  phe¬ 
nomena  of  ascending  prices  and  declining  purchasing 
power. 

Appreciation  of  the  Capitalistic  Dollar 

But  that  isn’t  the  whole  story.  For  every  cent  of 
decrease  in  the  purchasing  power  of  the  wage  dollar,  i.e., 
the  non-investor’s  dollar,  the  Capitalistic  dollar  increased 
in  value  one  cent.  It  is  far,  far  from  the  truth  to  say  that 
shrinkage  is  predicable  of  all  dollars.  Only  the  wage  dollar 
depreciated  in  value ;  and  because  the  non-investor ’s  dollar 
depreciated  in  value  the  Capitalistic  dollar  appreciated  in 
value.  Again  we  have  another  fine  example  of  the  inverse 
ratio ;  besides  a  splendid  illustration  of  cause  and  effect. 

The  Word  of  an  Authority 

According  to  Professor  Kemmerer  the  dollar  of  1920  had 
only  about  27  cents  the  value  of  the  dollar  in  1896.  This 
means  that  in  the  course  of  about  twenty-five  years  the 
value,  or  purchasing  power  of  the  wage  dollar  depreciated 
at  the  average  rate  of  about  three  cents  a  year — a  tragedy 
only  to  those  who  must  spend  their  entire  income  for  the 
mere  privilege  of  living — for  food,  clothes,  shelter,  and  the 
sundry  things  that  constitute  the  minor  comforts  of  life. 
Where  did  this  lost  value  go  ?  Whither  did  it  wrander  ?  It 
did  not  evaporate;  it  was  not  blown  away;  it  did  not  dis¬ 
solve  into  thin  air.  No !  it  entered  into  the  vampire  Capi¬ 
talistic  dollar.  While  the  wage  dollar  became  weak,  and 
wobbly,  and  emaciated,  the  Capitalistic  dollar  waxed  big, 
and  strong,  and  lusty.  While  the  wage  dollar  depreciated 


The  Shrinking  Dollar 


193 


at  the  rate  of  about  three  cents  a  year,  the  Capitalistic 
dollar  appreciated  at  the  cumulative  rate  of  about  three 
cents  a  year. 

Figures  That  Tell  the  Tale 

The  following  Table  approximately  illustrates  the  simul¬ 
taneous  weakening  of  the  wage  dollar  and  strengthening 
of  the  Capitalistic  dollar : 


How  the  Wage  Dollar 

How  the  Capitalistic 

Depreciated  in  Pur- 

Dollar  Appreciated 

chasing  Power 

in  Value 

Wage  Earner’s  Dollar 

Capitalistic  Dollar 

1896 _ 

.  $1.00 

$1.00 

1897. . . . 

.  0.97 

1.03 

1898. . .  . 

.  0.94 

1.06 

1899 _ 

.  0.91 

1.09 

1900. . . . 

.  0.88 

1.12 

1901. . . . 

.  0.85 

1.15 

1902. . . . 

.  0.82 

1.18 

1903. . . . 

.  0.79 

1.21 

1904. . . . 

.  0.76 

1.24 

1905. . . . 

.  0.73 

1.27 

1906. . . . 

.  0.70 

1.30 

1907. ... 

.  0.67 

1.33 

1908. .. . 

.  0.64 

1.36 

1909. . . . 

.  0.61 

1.39 

1910 _ 

.  0.58 

1.42 

1911. . . . 

.  0.5  5 

1.45 

1912 _ 

.  0.52 

1.48 

1913 _ 

.  0.49 

1.51 

1914. . . . 

.  0.46 

1.54 

1915 _ 

1.57 

1916. . . . 

.  0.40 

1.60 

1917. . .  . 

.  0.37 

1.63 

1918 _ 

.  0.34 

1.66 

1919.... 

.  0.31 

1.69 

1920.  ..  . 

.  0.28 

1.72 

For  more  than  a  dozen  years  I  have  puzzled  over  the 
phenomenon  of  the  shrinking  dollar;  for  as  many  years  I 
have  endeavored  to  express  the  shrinkage  in  words  and  fig¬ 
ures,  and  I  think  I  have  finally  succeeded  in  doing  this  to 
the  satisfaction  of  all  except  those  who  derive,  or  have  de¬ 
rived,  immense  material  benefits  from  the  transmutation 
that  has  simultaneously  depreciated  the  wage  dollar  and 
appreciated  the  Capitalistic  dollar.  It  goes  without  saying 


194 


The  New  Capitalism 


that  many  of  those  who  constitute  the  investor  group — - 
the  darling  beneficiaries  of  the  Capitalistic  System,  who 
prefer  to  conceal  from  the  world  that  their  sustenance  comes 
principally  from  the  loins  of  their  fellowmen;  and  that 
the  major  portion  of  their  income  or  profits  is  directly  de¬ 
rived  from  the  wage  earner’s  dollar — will  vehemently  pro¬ 
test  against  my  exposure  of  the  phenomenon  showing  the 
depreciation  of  the  wage  dollar,  and  the  inverse  apprecia¬ 
tion  of  the  Capitalistic  dollar.  ‘  ‘  Why,  ’  ’  they  will  say,  ‘  ‘  no 
economist  ‘in  good  standing,’  no  statistical  expert,  no  ac¬ 
cepted  authority,  has  ever  interpreted  the  shrinking  dollar 
as  set  forth  in  this  chapter.  ’  ’ 

The  Philosophy  of  the  Economists 

And  they  are  quite  right !  No  Capitalistic  economist,  no 
statistical  expert,  no  accepted  authority  has  ever  gone  to 
the  trouble  of  lucidly  stating  the  facts  in  the  case — neither 
with  regard  to  the  “shrinking”  dollar,  nor  with  regard  to 
many  other  economic  phenomena  in  which  the  average  man 
and  woman  is  vitally  interested.  Indeed  it  can  be  shown 
that  they  have  gone  to  great  lengths  at  times,  to  obscure  the 
truth  or  camouflage  economic  facts  into  indecipherability. 

I  am  not  finding  fault  with  the  Capitalistic  economists, 
“in  good  standing,”  nor  with  their  allies,  the  statistical 
experts  and  accepted  authorities.  I’ll  pay  them  the  com¬ 
pliment  of  saying  that  they  do  not  make,  and  never  have 
made,  any  pretentions  with  regard  to  the  science  they  pro¬ 
fess — a  “science”  from  which  every  ethical  principle  has 
been  ruthlessly  removed,  and  every  moral  consideration 
remorsely  eliminated;  a  “science”  that  admittedly  does 
not  concern  itself  with  the  welfare  of  humanity — but  only 
with  Wealth. 

Proudhon  has  said  that  “Political  economy,  which  is  re¬ 
garded  by  many  as  the  philosophy  of  wealth,  is  in  fact 
nothing  but  the  organized  practice  of  robbery  and  misery.” 

Ruskin  expressed  the  same  opinion  when  he  said :  “You 
were  ordered  by  the  Founder  of  your  religion  to  love  your 
neighbor  as  yourself.  You  have  founded  an  entire  Science 


The  Shrinking  Dollar 


195 


of  Political  Economy,  on  what  you  have  stated  to  be  the 
constant  instinct  of  man — the  desire  to  defraud  his  neigh¬ 
bor.  ’  ’ 

These  are  not  reckless  dicta  of  extreme  or  radical  men. 
But  if  you  are  disposed  to  hold  that  they  belong  to  the 
school  of  extremists,  suppose  you  consider  for  a  moment 
this  statement  made  by  N.  W.  Senior,  ‘  ‘  the  foremost  econo¬ 
mist  between  Ricardo  and  Mill,”  held  in  greatest  esteem 
in  his  generation,  and  to  this  day  by  economists  who  claim 
to  be  “in  good  standing.”  With  almost  brutal  frankness 
Senior  boldly  declared :  “  It  is  not  with  happiness  but  with 
wealth  that  I  am  concerned  as  a  political  economist;  and 
I  am  not  only  justified  in  omitting,  but,  perhaps,  am  bound 
to  omit,  all  considerations  which  have  no  influence  on 
wealth.  ’  ’ 

The  Wisdom  of  the  Serpent 

Which  being  the  case  we  can  hardly  blame  economists 
for  having  put  all  the  emphasis  on  the  shrinking  wage 
dollar  and  entirely  ignoring  that  other  phenomenon,  the 
expanded  Capitalistic  dollar.  They  have  admitted  the  meta¬ 
morphosis  of  the  wage  dollar  into  a  25  cent  dollar  (approx¬ 
imately)  within  twenty-five  years;  it  is  no  part  of  their 
duty  to  proclaim  to  the  world  that  within  the  same  period 
of  time  the  Capitalistic  dollar  has  apotheosized  itself  into 
a  175  cent  dollar.  We  can  hardly  expect  them  to  inform 
the  men  and  women  workers  of  the  nation  (three-fourths 
of  whom  are  in  the  wage  earner  or  non-investor  group) 
that  they  are  being  paid  with  25  cent  dollars,  while  the 
Capitalistic  group  is  rewarding  itself  with  175  cent  dollars. 
In  all  the  discussions  attendant  upon  wage  increases  since 
the  armistice,  I  have  never  come  across  a  single  writer 
who  even  so  much  as  hinted  that  Labor  is  being  paid  with 
depreciated  wage  dollars,  while  Capital’s  meed  is  propor¬ 
tioned  with  appreciated  dollars.  And  yet  that  truth  lies 
flat  at  the  bottom  of  the  whole  question.  However,  I  shall 
have  more  to  say  on  the  subject  of  Wages  in  Part  II  of  this 
book. 


196 


The  New  Capitalism 


Make  no  mistake — the  economists,  experts,  authorities, 
etc.,  have  the  ability  to  explain  the  mystery  of  the  High 
Cost  of  Living.  Indeed  they  could  if  they  would,  with 
comparative  ease,  explain  to  the  world  that  it  is  on  account 
of  the  admirable  generosity  with  which  the  Capitalistic 
group  rewards  itself,  that  the  purchasing  power  of  the 
wage  dollar  has  shrunk  to  such  sad  proportions;  and  that 
on  account  of  the  Capitalistically  superinduced  “shrink¬ 
age  ’  ’  those  who  work  for  a  wage  must  pay  nearly  four  dol¬ 
lars  for  what  formerly  cost  only  one  dollar. 


Another  Tell-Tale  Table 

The  following  Table,  which  I  have  constructed  on  the 
premises  stated,  gives  an  idea  of  what  has  taken  place  d 


What  Could  Be  Bought 
in  1896  for 

$  .25 . 

.50  . 

.75  . 

1.00  . 

2.00 . 

5.00 . 

10.00  . 

50.00  . 

75.00  . 

100.00  . 

200.00  . 

250.00  . 

500.00  . 

750.00  . 

1,000.00  . 


In  1920  Cost 
Approximately 

.  ..$  1.00 
1.75 

2.50 
3.25 

6.50 
16.25 
32.50 

. . .  162.50 

. .  .  243.75 

. . .  325.00 

. .  .  650.00 

. .  .  812.00 
. ..  1635.00 
. ..  2457.50 
. . .  3250.00 


A  Word  of  Caution 

When  analyzing  the  above  statistics  I  beg  the  reader  to 
remember  these  things : 

1 :  That  the  comparison  is  between  the  years  1896  and 
1920.  It  is  important  to  keep  this  clearly  in  mind  while 
reading  this  chapter.  Some  statisticians,  when  speaking  of 

i  In  order  to  enable  the  reader  to  grasp  the  point  more  easily  I 
have  taken  the  liberty  to  use  the  twenty-five  cents  value  of  the  depre¬ 
ciated  dollar  as  basic,  rather  than  the  twenty-seven  cent  dollar 
spoken  of  by  economists. 


The  Shrinking  Dollar 


197 


the  shrinking  dollar,  make  comparisons  between  later  years, 
for  example,  between  1914  and  1919.  Naturally  such  com¬ 
putations,  based  on  more  recent  years,  show  a  lesser  degree 
of  shrinkage  than  when  the  comparison  is  between  years 
more  widely  apart. 

2 :  That  the  increase  shown  applies  to  living  costs  in  the 
aggregate,  and  not  to  single  items.  It  would  be  absurd  to 
say  that  the  article  that  cost  twenty-five  cents  in  1896  cost 
one  dollar  in  1920,  although  beyond  a  doubt,  for  some  com¬ 
modities  the  increase  was  even  greater  than  my  figures  in¬ 
dicate. 

3 :  Under  1 1  living  costs”  I  include  all  living  commodities 
— food,  clothes,  rent,  and  whatever  enters  into  the  volume 
of  living  goods  consumed  by  an  average  family,  particularly 
by  the  eighty  percent  of  families  I  have  designated  as  non¬ 
investors. 

How  near  my  computations  are  to  those  of  the  accepted 
authorities  may  be  judged  from  the  fact  that  according  to 
Dun ’s  Index  Number  the  wholesale  prices  of  three  hundred 
articles  in  1896  was  $74.32,  whereas  in  1920  it  was  $260.41. 
My  computation  for  $75  in  1896  demanding  $243.75  in 
1920  is,  therefore,  not  wide  of  the  mark.  And  when  it  is 
remembered  that  Dun’s  Index  Number  is  based  on  whole¬ 
sale  prices,  while  my  computation  presumes  retail  prices, 
it  is  clear  that  I  am  exceedingly  conservative.2  Bradstreet’s 
Index  Number  shows  that  the  prices  of  157  commodities, 
which  could  be  bought  for  $591  in  1896,  had  risen  to  $2087 
in  February,  1920. 


2  It  is  to  be  remembered  that  most  Index  Numbers  are  based  on 
wholesale  prices.  If  retail  prices  were  used  instead  a  different  result 
would  follow.  Moreover,  they  concern  themselves  only  with  com¬ 
modities,  not  with  “living  costs,”  and  take  no  cognizance  of  rent 
increases.  Nor  do  they  take  into  consideration  that  for  many  of  the 
commodities,  such  as  clothes,  shoes,  all  kinds  of  wearing  material, 
fabrics,  textiles,  etc.,  while  prices  have  increased,  let  us  say  in  round 
numbers,  one  hundred  per  cent,  quality  has  been  reduced  by  about 
one-half,  thus  putting  the  average  family  to  the  necessity  of  purchas¬ 
ing  a  double  quantity.  In  brief.  Price  Index  Numbers  are  of  pre¬ 
carious  value.  Certainly  they  do  not  show  the  actual  increase  or 
decrease  in  the  aggregate  living  costs. 


198 


The  New  Capitalism 


The  N on- Shrinkability  of  the  Capitalistic  Dollar 

No  Capitalistic  economist,  statistical  expert  or  accepted 
authority  has  ever  pointed  out  that  the  Capitalistic 
dollar  is  non-shrinkable ;  that  the  dollar  in  the  hands 
of  a  Capitalistic  overlord  retains  its  full  strength;  that 
when  Capitalistically  employed  there  is  no  lost  value  to  be 
noted  in  the  dollar.  Let  me  briefly  illustrate  the  point. 

Fifty  thousand  John  Smiths — each  a  small  salaried  man 
— pay  out  of  their  meager  income,  fifty  dollars  a  year  as 
premium  on  a  one  thousand  dollar  Life  Insurance  Policy. 
The  Insurance  Company  invests  these  $2,500,000  in  a  new 
building.  Let  us  say  the  building  could  have  been  erected 
in  1896  for  $1,250,000.  What  has  raised  the  cost  of  the 
building?  Increase  in  cost  of  material,  supplies,  etc.  But 
the  same  Capitalistic  principals  who  own  or  control  the 
Insurance  Company,  also  have  a  monopoly  of  all  the  build¬ 
ing  materials,  supplies,  etc.  Consequently  they  pay  the  big¬ 
ger  price  to  themselves.  And  the  bigger  price,  based  sup¬ 
posedly  on  a  bigger  investment,  yields  them  a  bigger  profit. 
Then  there  are  the  higher  freight  rates ;  but  the  same  group 
that  owns  or  controls  the  Insurance  Company,  and  the 
materials  and  the  supplies,  also  owns  the  railroads;  there¬ 
fore  is  directly  benefited  by  the  higher  freight  rates.3 
(Don’t  interrupt  me  with  the  stock  explanation  that  mate¬ 
rials,  increases  in  the  price  of  supplies,  freight,  etc.,  are  due 
to  increase  in  wages.  It  is  just  the  other  way  around. 
Moreover,  I  shall  show  in  the  second  half  of  my  book,  that 
whatever  increase  in  wages  Labor  has  had  was  invariably 
taken  away  again  through  the  medium  of  still  higher 
prices.) 

Now  let  us  assume  that  the  borrowing  of  money  enters 
into  the  construction  of  the  building.  And  let  us  say  that 
on  account  of  the  increase  in  the  price  of  materials  and 
supplies,  freight  rates  (and  wages,  if  you  will),  it  is  neces¬ 
sary  to  borrow  double  the  amount  the  Insurance  Company 

3  And  I’ll  not  say  a  single  word  about  the  “Pittsburgh  Plus’’  plan 
at  this  time. 


The  Shrinking  Dollar 


199 


would  have  borrowed  in  1896 ;  and  therefore  the  principals 
are  paying  twice  as  much  interest.  But  remember  the  same 
group  that  owns  the  Insurance  Company,  and  the  railroads, 
and  has  a  monopoly  on  materials,  supplies,  etc.,  also  owns 
the  banks;  and  so  is  the  immediate  beneficiary  of  the  larger 
borrowings  and  the  higher  interest  charges. 

Very  well!  The  building,  when  completed,  has  an  in¬ 
creased  value  of  one  hundred  percent.  Consequently  the 
Capitalistic  owners  of  the  building  can  issue  bonds  for 
double  the  amount  they  would  have  issued  in  1896.  And 
they  reap  double  the  amount  of  commissions,  and  double 
the  fixed  charge — interest.  Moreover,  the  larger  bond  issue 
increases  the  borrowing  capacity  of  the  holders ;  for,  bonds 
are  credit  instruments,  and  accepted  by  banks  as  collateral. 

And  when  the  building  is  ready  for  occupancy,  the  Cap¬ 
italistic  owners  charge  their  tenants  twice  as  much  rent  as 
they  would  have  demanded  in  1896.  Thus  they  derive  twice 
as  much  income  from  the  building.  At  no  point  can  it  be 
said  that  the  Capitalistic  dollar  has  lost  any  of  its  value, 
purchasing,  or  earning,  power.  Bigger  income,  bigger 
profits,  are  visible  everywhere,  and  raining  more  profusely 
than  ever  into  the  lap  of  the  small  Capitalistic  group. 

But — 

But  when  John  Smith  dies,  his  $1000  policy  will  have  a 
purchasing  power  of  only  $250,  measured  in  the  1896  value ; 
the  difference — $750 — being  absorbed  by  the  higher  prices 
his  widow  or  family  must  pay  for  the  needful  things  of 
life — thanks  to  the  Capitalistic  System,  controlled  and 
manipulated  by  those  to  whom  the  late  head  of  the  family 
had  been  paying  his  premium  of  $50  a  year  regularly. 

Truly  there  is  a  ‘‘shrinkage”  in  the  dollar,  but  only 
when  it  passes  out  of  Capitalistic  hands,  or  is  employed  in 
other  than  Capitalistic  transactions.  Let  me  give  you  what 
is  probably  the  most  striking  illustration  of  all,  and  which 
will  impress  you  with  the  real  meaning  of  ‘  ‘  shrinkage. 1  ’ 


200 


The  New  Capitalism 


How  the  “Shrinkage”  Affects  Savings 

In  1896  the  savings  depositors  had  on  deposit  in  savings 
banks  of  the  United  States,  a  total  of  $1,935,466,468.  In 
1896  the  dollar  had  a  one  hundred  cents  purchasing  power. 

In  1920  the  savings  depositors  had  on  deposit  in  the  sav¬ 
ings  banks  of  the  United  States  a  total  of  $6,536,596,000. 
But  by  1920  the  purchasing  power  of  the  dollar  had  shrunk 
to  approximately  twenty-eight  cents. 

Consequently  the  purchasing  power  of  the  $6,536,596,000 
on  deposit  in  1920  had  a  purchasing  power  equivalent  to 
$1,830,246,880  in  1896. 

No  better  illustration  of  the  “shrinkage”  in  the  wage 
dollar  than  this.  In  brief,  the  nearly  five  billion  dollars 
saved  during  twenty  years,  gave  no  increase  of  purchasing 
power  to  the  owners. 

The  amount  of  money  you  saved,  penny  by  penny, 
whether  you  have  it  in  a  sock  or  in  a  savings  bank,  has 
today  a  purchasing  power  only  about  one-fourth  of  what 
it  was  in  1896.  That  is  to  say,  what  you  could  have  bought 
in  1896  with  one  dollar  of  your  savings,  will  take  nearly 
four  dollars  of  your  savings  if  purchased  today.  Nor  is 
there  any  immediate  prospect  that  a  change  of  conditions 
will  materially  improve  the  purchasing  power  either  of 
your  wages  or  savings.  Nor  is  there  any  evidence  of 
willingness  on  the  part  of  the  Capitalistic  group  to  materi¬ 
ally  increase  the  purchasing  power  of  your  wages  or  value 
of  your  savings.  On  the  contrary !  If  the  Capitalistic 
group  can  get  away  with  it ;  if  it  succeeds  in  its  double  pur¬ 
pose  of  increasing  its  income — interest,  dividends,  and 
profits — by  bringing  down  wages  approximately  to  the  1914 
level,  while  maintaining  a  high  level  of  prices — the  purchas¬ 
ing  power  of  your  wages  and  savings  will  shrink  still  more. 
Precisely  where  it  will  stop  it  is  idle  to  speculate  at  this 
time. 


The  Shrinking  Dollar 


201 


The  Most  Damnable  Capitalistic  Device 

In  a  previous  chapter  I  have  stated  that  the  Capitalistic 
System,  through  sundry  clever  devices,  extorts  about  $750 
a  year  from  the  average  family.  But  the  most  ingenious 
Capitalistic  device,  by  the  general  employment  of  which 
the  $750  is  extorted,  while  at  the  same  time  the  shrinkage 
of  the  wage  dollar  is  made  to  appear  as  if  it  were  a  perfectly 
natural  phenomenon — the  necessary  effect  of  an  irresistable 
cause — is  what  is  known  as  the  Percentage  System  of 
figuring  increases  in  cost,  and  which  percentage  increases 
determine  the  price  of  every  article  of  merchandise. 

I  have  had  occasion  to  denounce  this  reprehensible  prac¬ 
tice  a  number  of  times  in  the  past,  and  shall  lose  no  oppor¬ 
tunity  to  hold  it  up  to  obloquy  today.  What  is  wrong  with 
the  Percentage  System  of  computing  increases?  Is  it  not 
perfectly  legitimate  and  fair?  Let  me  show  you  how  it 
works,  and  then  judge  for  yourself  whether  it  is  beneficent 
or  otherwise — whether  it  is  fair,  or  unfair. 

Let  us  say  that  the  basic  price  of  cattle  is  $6.00  per  hun¬ 
dredweight.  Then  it  raises  to,  let  us  say,  $12.00.  “Aha!” 
says  the  wholesale  slaughterer — “An  increase  of  100  'per¬ 
cent!  I  must  increase  my  price  to  the  retail  dealer  100 
percent — plus  an  additional  profit  on  the  increase.” 

The  retail  dealer  gets  his  invoice,  looks  it  over  and  says : 
“Aha,  an  increase  of  100  percent !  I  must  raise  my  price 
to  the  consumer  100  percent,  plus,  of  course,  a  profit  on 
the  increase.” 

And  so  through  the  agency  of  the  Percentage  System  of 
figuring  increases  of  prices  the  consumer  is  compelled  to 
pay  three  separate  100  percent  increases  (and  sometimes 
more  than  three) .  Do  you  wonder  any  longer  at  the  present 
“high  level  of  prices”  for  all  the  commodities — food,  rent, 
clothes,  shoes,  coal,  steel,  in  brief  every  article  that  enters 
into  living  costs? 

Here  you  have  the  principle  and  the  modus  operandi  of 
the  Percentage  System  of  figuring  increases,  now  univer¬ 
sally  used,  and  supposed  to  be  perfectly  legitimate,  set  forth. 


202 


The  New  Capitalism 


I  call  it  the  most  damnable  of  all  Capitalistic  devices.  And 
yet,  so  far  as  I  know,  it  has  never  been  challenged.  In  all 
these  years  I  have  never  once,  in  any  financial,  commercial, 
or  trade  paper,  nor  from  any  public  or  after-dinner  speaker, 
nor  statistical  expert,  nor  professor  of  economics,  nor 
skilled  mathematician,  nor  any  text  book  on  cost  account¬ 
ing,  read  or  heard  so  much  as  a  whisper  of  protest  against 
nor  exposure  of,  this  blatant  sophistry  and  damnable 
humbug. 

The  Percentage  System  is  essentially  a  pyramiding  sys¬ 
tem,  and  I  for  one,  demand  its  abrogation  as  a  matter  of 
simple  justice.  Take  any  commodity — coal,  for  example: 
add  to  the  1914  price  all  the  actual  increases  computed  in 
dollars  and  cents — wages  of  miners,  insurance,  taxes  and 
sundry  items  that  can  be  legitimately  included  in  “cost  of 
production” — and  note  the  difference  between  the  cent  sys¬ 
tem  of  figuring  increases  and  the  Percentage  System. 

But  I  shall  have  more  to  say  on  this  subject  in  Part  II 
of  this  book.  For  the  present  I  ’ll  merely  say  that  the  uni¬ 
versal  discontinuance  of  the  Percentage  System  and  the 
adoption  of  the  cent  system  alone,  would  quickly  bring 
down  prices  to  a  normal  and  decent  level,  and  forever  make 
impossible  violent  price  fluctuations.  Besides  the  shrinking 
wage  dollar  would  cease  shrinking,  and  regain  a  goodly 
portion  of  its  pristine  vigor. 


CHAPTER  XVII 

The  American  Standard  of  Living 


WE  frequently  hear  it  said,  generally  by  those  who 
never  look  below  the  surface  of  things,  who  give  no 
serious  thought  nor  study  to  any  subject,  whose 
reading  is  confined  to  a  desultory  perusal  of  the  daily 
papers  (gorging  themselves  on  headlines),  whose  scientific 
knowledge  or  intelligent  understanding  of  economic  prob¬ 
lems  is  nil,  whose  opinions  are  based  on  casual  observations 
in  their  own  restricted  circle,  whose  views  of  life  are  derived 
from  their  own  limited  experience,  who  base  all  their  con¬ 
clusions  on  a  few  cases  known  to  them,  or  their  own  par¬ 
ticular  case,  that  the  American  Standard  of  living  is  the 
highest  in  the  world.  By  that  is  meant  that  the  wage  earn¬ 
ers  in  the  United  States  receive  higher  wages,  eat  better 
food,  wear  better  clothes,  live  in  better  houses,  and  amid 
better  surroundings,  enjoying  more  comforts  and  even  some 
luxuries;  in  brief  that,  generally  speaking,  they  are  better 
off  than  the  wage  earners  of  Europe  and  other  countries. 

In  order  to  save  time  and  space  let  us  accept  the  state¬ 
ment  without  cavil  or  without  pausing  to  analyze  it — as  if 
it  were  and  always  had  been,  literally  true.  Let  us  say  that 
the  American  Standard  of  living  is  the  highest  in  the  world, 
and  that  the  economic  condition  of  the  wage  earners  of  the 
United  States  is  superior  to  that  of  the  workers  of  Europe, 
or  Asia,  or  Mexico. 

Organized  Labor  Established  the  Standard 

But  why  is  the  American  Standard  of  living  higher  than 
the  standard  of  any  other  people?  The  answer  comes 
naturally:  because  wages  are  higher.  And  why  are  wages 


203 


204 


The  New  Capitalism 


higher?  The  answer  is  simple:  because  organized  wage 
earners  insisted  that  they  shall  receive  a  fairly  decent 
recompense  for  their  labor.  It  was  their  persistence  alone 
that  has  given  us  what  is  called  the  American  Standard  of 
living — a  standard  admittedly  somewhat  higher  than  the 
standard  of  European  countries.  For  our  “higher  stand¬ 
ard  of  living”  certainly  no  thanks  whatever  is  due  to  the 
Capitalistic  group,  who  from  the  beginning,  year  in  and 
year  out,  fought  against  every  demand  for  better  wages; 
and  who  granted  wage  increases  only  reluctantly  and 
grudgingly,  and  that,  too,  in  spite  of  the  fact  that  they 
had  invariably  nullified  the  benefits  of  each  wage  increase 
by  a  previous  increase  in  the  prices  of  their  commodities. 

But  Organized  Capital  Claims  the  Credit 

It  cannot  be  denied  that  our  higher  standard  is  the 
result  of  organized  Labor’s  stubborn  and  often  bitter  fight 
for  higher  wages — to  that  and  that  alone.  Notwithstanding 
which  provable  fact  the  Capitalistic  group  has  for  years 
claimed  the  credit,  as  if  our  “higher  standard”  had  been 
of  their  making — a  gratuitous  gift  graciously  bestowed 
upon  us  out  of  the  plenitude  of  their  generosity. 

For  example,  James  J.  Hill,  in  his  “Highways  of  Prog¬ 
ress”1  (p.  122)  says:  “So  far  as  modern  industrial  meth¬ 
ods  are  concerned  we  may  fairly  say  that  their  net  result 
has  been  to  cheapen  production,  and  thus  place  more  of  the 
comforts  of  life  within  the  reach  of  the  people.  ’  ’  Mr.  Hill 
also  contended  that  big  business  combinations  and  conse¬ 
quent  lower  cost  of  production2  inevitably  yield  lower 
prices  and  higher  wages,  and  therefore  “cheaper  and  more 
abundant  food,  shelter  and  clothing,”  etc. 

1  Published  in  1912,  Doubleday  Page  &  Co.,  New  York. 

2  It  can  be  proved  that  generally  speaking  big  combinations  did  not 
lower  cost  of  production  ;  on  the  contrary  raised  it  considerably.  But 
assuming  that  they  did  “lower  cost  of  production,”  no  benefit  accrued 
to  the  public  from  the  reduction  ;  just  the  reverse. 


The  American  Standard  of  Living  205 
Shall  the  Standard  Be  Maintained  f 

Not  to  Capital,  but  to  organized  Labor,  belongs  the  full 
credit  for  having  established  what  it  pleases  many  to  call 
the  American  Standard  of  living.  Indeed  the  present  bitter 
fight  between  organized  Labor  and  organized  Capital,  more 
properly  speaking,  between  organized  wage  earners  and  the 
organized  Capitalistic  group,  revolves  around  the  question 
whether  the  American  Standard  of  living  shall  be  main¬ 
tained,  or  whether  it  shall  be  reduced  to  the  admittedly 
lower  European  standard;  and  ultimately  to  the  low  Ori¬ 
ental  standard.  The  Capitalistic  group  has  demanded  that 
the  American  Standard  shall  no  longer  be  maintained ;  and 
organized  Labor  is  fighting  for  its  maintenance.  Who  will 
win?  Organized  Capital  or  organized  Labor?  It  must  be 
admitted  that  thus  far  organized  Capital  has  nothing  but 
victories  to  report.  Indeed  it  may  be  truly  said  that  organ¬ 
ized  Capital  has  been  brilliantly  successful. 

Lotvering  the  Standard 

I  cannot  follow  the  fight  step  for  step,  and  shall,  there¬ 
fore,  content  myself  with  noting  a  few  of  the  obvious  results 
thus  far  obtained  by  organized  Capital. 

The  Department  of  Labor  in  the  “Monthly  Labor 
Review,  ”  July,  1920,  gives  an  analysis  of  some  of  the 
effects  of  increased  cost  of  living  on  family  budgets.  It 
found,  among  other  things,  that  there  was  a  less  quantity 
of  fresh  beef,  fresh  pork,  salt  pork  and  poultry  purchased 
in  1918-19  than  in  1901.  “In  many  cases  the  decrease  in 
quantity  is  striking,  such,  for  instance,  as  in  fresh  pork 
from  87  pounds  in  North  Atlantic  States  in  1901,  to  19 
pounds  in  New  York,  and  22  pounds  in  Portland,  Me.,  in 
1918-19.  ”  Decreases  with  regard  to  the  consumption  of 
many' other  articles  of  food  are  noted,  among  them  eggs, 
milk,  butter,  lard  and  sugar.  Making  a  comparison  of  the 
total  number  of  pounds  of  food  purchased  in  1918-19  by 
the  standard  family  in  each  of  the  five  North  Atlantic 
cities,  the  analysis  shows  that :  “In  none  of  the  cities  listed 


206 


The  New  Capitalism 


in  the  report  does  the  total  reach  that  of  the  health  and 
decency  budget  of  the  Bureau  of  Labor  Statistics,  *  ’  and 
that  “the  food  actually  consumed  in  these  cities  of  the 
North  Atlantic  group  falls  considerably  below  the  3,500 
calories  generally  recognized  as  the  standard  by  food 
experts.  ’  ’ 

Those  who  refuse  to  grasp  the  significance  of  the  fore¬ 
going  will,  perhaps,  be  able  to  see  a  little  light  when  they 
ponder  over  this: 

“Dr.  Wood  of  Columbia  University,  after  an  exhaustive 
investigation,  informs  the  public  that  25  percent  of  the 
20,000,000  school  children  of  the  United  States  are  imper¬ 
fectly  nourished.”3 

The  Difficulty  of  Making  Ends  Meet 


The  United  States  Department  of  Labor,  during  1921, 
published  a  number  of  tables  pertaining  to  changes  in  the 
cost  of  living  in  some  of  the  big  cities.  From  the  report 
issued  June  20th  (the  day  on  which  I  am  writing  this) 
covering  ten  cities,  I  give  the  expenditure  data  pertaining 
to  the  first  city  on  the  list,  viz.,  Baltimore,  Md. : 


Items  of 
Expenditure 

Food . 

Clothing . 

Housing . 

Fuel  and  Light . 

Furniture  and  Furnishings 
Miscellaneous  . 


Percent  of 
Total  Expenditure 

_  42.0 

_  15.0 

_  14.0 

....  5.0 

....  4.3 

_  19.7 


These  percentages  applied  to  an  average  family  of  five 
with  a  statistical  income  of  $1,500  a  year,  computed  in 
dollars  and  cents,  give  the  following  results: 

Per  Year  Per  Person  Per  Person  Per  Person 
(5  Persons)  Per  Year  Per  Week  Per  Day 


Food . $630.00  $126.00  $2.43  35  cts. 

Clothing .  225.00  45.00  .87  12^  cts. 

Housing .  210.00  42.00  .81  11*4  cts. 

Fuel  and  Light .  75.00  15.00  .29  4  cts. 

Furniture  and  Fur’shings.  .  64.50  14.50  .28  4  cts. 

Miscellaneous  .  295.50  59.10  1.14  16  cts. 


3  From  a  pamphlet  entitled  “Fabric  Facts,”  published  by  Strang 
Hewat  &  Co.,  Inc. 


The  American  Standard  of  Living  207 


Surely  it  is  not  necessary  to  make  any  extended  comment 
on  these  items  in  the  family  budget.  They  speak  for  them¬ 
selves;  they  need  no  lengthy  explanation.  But  since  there 
are  those  who  refuse  to  see  the  light,  no  matter  how  clear 
it  may  be,  let  us  briefly  analyze  the  first  item — Food — for 
which  an  average  family  of  five,  having  at  least  theoretically 
a  joint  income  of  $1,500  a  year,  is  supposed  to  expend  $630 
within  twelve  months.  Food  prices  at  the  time  these  sta¬ 
tistics  were  computed  by  the  Government,  were  supposed 
to  be  considerably  less  than  peak  prices  in  1920;  but  the 
average  housewife,  as  she  scans  her  weekly  expense  for 
meats,  groceries,  vegetables,  milk,  butter,  eggs,  ice,  etc., 
wonders  how  she  can  feed  her  family  on  the  statistical  $630 
a  year ;  for  an  annual  expenditure  of  $630  for  food  means 
only  about  $12.00  a  week,  which  is  an  allowance  of  about 
$2.43  per  person  per  week,  or  about  35  cents  a  day  per 
person.  Considering  that  the  average  healthy  person  eats 
three  meals  a  day  it  means  about  twelve  cents  per  meal. 
Hats  off  to  the  housewife  who,  considering  prevailing  prices, 
can,  day  after  day,  put  up  a  nourishing  meal  at  an  average 
outlay  of  only  about  twelve  cents  per  head.  Well  may  the 
husband,  who,  perhaps,  takes  his  noonday  luncheon  at  some 
cheap  restaurant,  paying  ten  cents  for  a  bowl  of  soup, 
fifteen  cents  for  a  sandwich,  ten  cents  for  a  cup  of  coffee 
and  five  cents  for  a  doughnut  or  two,  and  twenty-five  cents 
for  half  a  cantaloupe,  wonder  how  she  does  it. 

Thus  could  I  analyze  item  after  item  in  the  household 
budget,  but  I  do  not  deem  it  necessary  except  for  those 
who  are  blind  because  they  do  not  want  to  see,  and  I  haven’t 
much  space  to  waste  on  them.  Just  one  word,  however, 
with  regard  to  the  “Miscellaneous”  item.  It  would  be 
interesting  to  know  what  “Miscellaneous”  covers.  For 
example,  assuming  that  two  of  the  five  persons  work,  and 
that  they  must  both  use  the  street  car  coming  and  going,  it 
means  sixteen  cents  a  day  per  person,  or  thirty-two  cents 
for  both,  and  counting  three  hundred  days  a  year  it  means 


208 


The  New  Capitalism 


an  expenditure  of  $96  for  street  car  fare  alone.4  We  may 
indeed  speak  of  the  “high  standard  of  living,”  and  give 
organized  Labor  credit  for  having  established  it;  but  God 
knows  organized  Capital  is  making  us  pay  the  price  for  its 
maintenance. 

The  Item  of  Rent 

The  National  Industrial  Conference  Board  Review  Re¬ 
port,  Number  44  (December,  1921)  on  “Changes  in  the 
Cost  of  Living”  says:  “Investigations  made  by  authori¬ 
tative  agencies  indicate  that,  in  normal  years  preceding  the 
war,  average  wage  earners’  families  so  apportioned  their 
expenditures  as  to  spend  approximately  43  percent  of  the 
total  for  food,  18  percent  for  shelter,  13  percent  for  cloth¬ 
ing,  6  percent  for  fuel  and  light,  and  20  percent  for  sun¬ 
dries.”  Computed  in  dollars,  the  item  of  rent  is  $270  a 
year,  or  about  $22.50  a  month,  which  is  a  huge  joke.  I’ll 
venture  the  statement  that  a  majority  of  wage-earners 
residing  in  the  large  cities  and  fair  sized  towns  (unless  they 
live  in  hovels  and  dumps)  are  paying  considerably  more 
than  $22.50  a  month.  I  maintain  that  the  average  yearly 
rental  is  nearer  $400  than  $270  per  family.  Confining 
myself  to  conditions  in  Chicago,  rentals,  on  an  average, 
have  been  raised  fully  one  hundred  percent.  Thousands  of 
families  that  lived  in  fairly  decent  neighborhoods,  paying 
perhaps  from  $35  to  $65  a  month,  were  confronted  with  the 
alternative  of  paying  twice  as  much  rent  or  moving.  As  a 
result  tens  of  thousands  of  families  were  compelled  either 
to  move  into  less  desirable  neighborhoods,  or  go  into  smaller 
quarters,  or  double  up  with  another  family,  or  break  up 
their  home  altogether,  storing  their  furniture  and  boarding, 
or  retrenching  in  other  things.  In  many  cases  to  meet  the 
situation  other  members  of  the  family,  not  infrequently  the 
wife  and  mother,  entered  the  ranks  of  workers.  There  are 
no  statistics,  but  it  is  quite  believable  that  in  the  aggregate 
throughout  the  United  States  hundreds  of  thousands  of 

4  Since  the  above  was  written  there  has  been  a  slight  decrease  in 
the  street  car  fare  in  some  cities. 


The  American  Standard  of  Living  209 

families  have  been  compelled  to  materially  revise  their 
standard  of  living  downward — thanks  to  the  well  laid  and 
cleverly  organized  plans  of  the  Capitalistic  System.  I  care 
not  what  arguments  you  might  advance  to  explain  the  con¬ 
dition,  or  minimize  the  guilt  of  those  responsible.  I  am, 
for  the  present,  dealing  with  the  fact — that  the  ‘  ‘  American 
Standard7’  of  living  has  been  lowered. 

The  Capitalistic  System 

There  will  be  those  who  will  say :  Why  blame  the  Capital¬ 
istic  group  for  the  well  nigh  universal  increase  in  rents? 
Morgan,  Gary,  Schwab,  et  al.  do  not  own  the  houses  in  which 
the  wage  earners  live;  they  are  not  the  landlords.  Quite 
true!  but  they,  i.e.,  the  dominant  members  of  the  Capital¬ 
istic  group,  control  the  banks,  which,  as  is  well  known,  have 
given  practically  no  assistance  to  the  public,  and  certainly 
made  no  effort  to  relieve  the  distressing  situation.  More¬ 
over,  they  control  the  building  materials  market,  and  the 
prices  they  arbitrarily  fixed  for  them  had  made  building 
prohibitive.  But  that  is  not  the  point.  Let  us  put  the 
entire  blame  for  the  exorbitant  rents  on  real  estate  men, 
and  landlords.  Why  did  they  raise  their  rents — practically 
doubling  them?  What  was  their  excuse?  On  what  did 
they  base  the  increase,  and  how  did  they  compute  it?  On 
the  Capitalistic  principles :  1 :  Inflated  valuation ;  2  :  Arbi¬ 
trary  raising  of  the  price  of  property  by  selling  and  resell¬ 
ing  ;  3  :  Basing  rentals  on  ‘  ‘  replacement  ’  ’  valuation ;  4 :  The 
employment  of  the  Percentage  System  of  figuring  increases. 

You  may,  if  you  choose,  exculpate  certain  individuals 
within  the  Capitalistic  group — but  you  cannot  exonerate 
the  System — you  cannot  defend  the  principles,  nor  the 
methods,  no  matter  by  whom  practiced,  particularly  since 
their  universal  employment  is  responsible  for  what  I  charge 
— namely  the  compulsory  lowering  of  the  American  Stand¬ 
ard  of  living. 


210 


The  New  Capitalism 


Holding  Up  the  European  Standard  as  an  Ideal 

The  anonymous  writer  in  The  Saturday  Evening  Post 
referred  to  in  a  previous  chapter,  makes  a  strong  point 
of  the  extravagance  of  the  American  wage  earner.  He  can¬ 
not  understand  why  the  American  born  wage  earner  com¬ 
plains  about  his  wages,  considering  that  foreign  born 
workers  (he  speaks  particularly  of  steel  workers)  manage 
to  save  a  considerable  sum  out  of  their  wages. 

Of  course  the  anonymous  writer  did  not  go  to  the  trouble 
of  explaining  that  there  are  millions  of  foreign  born  wage 
earners  in  this  country  who  do  not  live  according  to  the 
American  Standard.  Eight  or  ten  or  twelve  (and  more) 
persons — men,  women  and  children — are  huddled  together 
in  two  or  three  squalid  rooms  in  dirty  tenement  houses,  or 
hovels,  paying  only  a  nominal  rent.  Needless  to  say,  in 
some  cases  the  women  work ;  and  frequently,  also,  the  chil¬ 
dren.  They  buy  only  the  cheapest  food  and  clothes.  They 
purchase  nothing  that  adds  to  their  creature  comforts, 
which  being  the  case  it  is  possible,  that  out  of  their  aggre¬ 
gate  earnings  they  save  a  fair  portion.  But  if  they  lived 
according  to  what  is  called  the  American  Standard,  if,  in¬ 
stead  of  living  in  miserable  rooms  in  a  crowded  tenement 
house  or  hovel,  they  lived  in  decent  quarters  or  neighbor¬ 
hoods  ;  if  they  consumed  the  food  that  an  average  American 
consumes,  or  made  any  attempt  at  even  ordinary  social  im¬ 
provement,  it  is  quite  likely  that  the  savings  of  these 
foreigners  would  be  considerably  less  than  our  anonymous 
critic  would  have  us  believe  they  are. 

True,  many  of  these  foreigners  are  living  in  out-of-the- 
way  places,  far  removed  from  the  centers  of  civilization. 
How  they  live,  the  food  they  eat,  the  clothes  they  wear,  is 
their  own  affair.  But  to  hold  them  up  to  men  and  women 
of  America  as  proof  that  it  is  possible  to  save  out  of  wages 
which  are  demonstrably  inadequate  for  the  maintenance  of 
of  a  decent  living  standard,  or  as  an  example  worthy  of 
emulation,  or  to  intimate  that  the  foreigner  is  thrifty  and 
economical  and  the  average  American  is  shiftless  and 


The  American  Standard  of  Living  211 


extravagant,  is  exceeding  the  speed  limit  of  imagination; 
nay  it  is  the  height  of  impertinence  and  an  insult  to  every 
decent  American  man  and  woman. 

The  Truth  Without  Trimmings 

Perhaps  the  anonymous  author  has  never  read  the  report 
of  the  Interchurch  World  Movement  Committee  on  the 
Steel  strike  of  1919,  according  to  which : 

‘  ‘  The  annual  earnings  of  over  one-third  of  all  productive 
iron  and  steel  workers  were,  and  have  been  for  years,  below 
the  level  set  by  the  government  experts  as  the  minimum  of 
subsistence  standard  for  families  of  five. 

“The  annual  earnings  of  72  percent  of  all  workers  were, 
and  have  been  for  years,  below  the  level  set  by  government 
experts  as  the  minimum  of  comfort  level  for  families  of 
five. 

“This  second  standard  being  the  lowest  which  scientists 
are  willing  to  term  an  'American  Standard  of  living’,  it 
follows  that  nearly  three-quarters  of  the  steel  workers  could 
not  earn  enough  for  an  American  standard  of  living. 

“The  bulk  of  unskilled  steel  labor  .  .  .  earned  less 

than  enough  for  the  average  family ’s  minimum  subsistence. 

“The  bulk  of  semi-skilled  steel  workers  earned  less  than 
enough  for  the  average  family ’s  minimum  comfort. 

“Skilled  steel  labor  is  paid  wages  disproportionate  to 
the  earnings  of  the  other  two-thirds,  thus  binding  the  skilled 
class  to  the  companies  and  creating  division  between  it  and 
the  rest  of  the  force.  ’  ’5 

The  Economic  Sin  of  Extravagance 

Let  me  say  it  once,  and  without  further  parley,  that 
during  the  past  twenty  years  there  has  crept  into  the 
nation’s  life,  like  a  slimy  snake  into  a  fair  garden,  wanton 
extravagance  and  sinful  wastefulness,  a  sort  of  national 
thriftlessness  and  shiftlessness,  for  which  no  economic  rem¬ 
edy  can  be  formulated.  Nor  shall  I  waste  much  time  in 


5  Chapter  IV,  “Wages  in  a  No  Conference  Industry.” 


212 


The  New  Capitalism 


tearful  commiseration  for  those  who,  with  their  eyes  wide 
open  and  of  their  own  free  will,  are  jazzing  toward  their 
economic  doom.  There  are  today,  principally  in  the  big 
cities,  I  know  not  how  many  million  men  and  women  who 
are  living  away  beyond  their  means ;  in  better  style  and  in 
better  neighborhoods  than  their  income  justifies;  wearing 
clothes  and  eating  foods  they  cannot  afford;  running  auto¬ 
mobiles,  and  into  debt,  in  an  endeavor  to  maintain  a  false 
social  status  and  a  standard  of  pretense  despite  an  empty 
purse ;  and  their  number  is  growing  alarmingly. 

Shall  I  venture  an  estimate  of  the  numerical  strength  of 
this  tribe?  Is  it  ten  percent  of  the  population — or  two 
million  families,  involving  not  only  the  men  and  women, 
but  also  the  children?  Is  that  too  low  an  estimate?  I’ll 
double  it  if  you  think  I  am  too  conservative.  It  is  imma¬ 
terial!  I  am  less  interested  in  the  exact  number  than  in 
the  fact  that  these  ten,  or  more,  million  thriftless  economic 
derelicts,  and  shiftless  social  pretenders,  are  amongst  us, 
and  we  must  take  some  note  of  them  in  passing.  But  this 
is  certain — that  they  belong  chiefly  to  the  economic  groups 
whose  individual  earnings  are  in  excess  of  $1500  a  year. 
Few  in  the  classes  whose  family  income  is  from  $500  to 
$1500  are  included  in  the  category  of  the  socially  pre¬ 
tentious  and  economically  shiftless. 

Let  none  dare  urge  that  many  a  girl  working  in  store  or 
office,  factory  or  shop,  wears  silk  stockings  instead  of  lisle 
or  cotton ;  or  perhaps  in  an  evil  moment,  or  hour  of  aber¬ 
ration  has  invested  a  goodly  portion  of  a  year’s  wage  in  a 
fur  coat ;  or  that  the  laundress  goes  to  the  movies  with  her 
children  an  average  of  once  or  twice  a  week;  or  that  the 
colored  porter  in  the  barber  shop  smokes  fifteen  cent  cigars. 
Let  none  with  glib  tongue  enumerate  the  venial  economic 
sins  of  a  comparatively  small  percentage  of  foolish  or 
deluded  wage  earners,  lest  I  be  tempted  to  bombard  him 
with  a  few  leading  questions  that  will  glaringly  reveal  his 
own  much  more  flagrant  economic  transgressions.  The  big 
fact  to  remember  is  that  the  earnings  of  a  majority  of  wage 
earners  and  lower  salaried  men  and  women,  are  insufficient 


The  American  Standard  of  Living  213 


to  enable  them  and  their  families  to  live  in  decent  comfort. 
No  dust  throwing  tactics  can  obscure  this  fact.  Eighty  per¬ 
cent  of  the  workers’  families,  according  to  the  1910  statis¬ 
tics,  had  an  income  of  $1200  or  less  a  year — an  amount, 
considering  prices  of  living  goods — clothes,  food,  rent,  etc., 
that  fell  below  even  the  subsistence  level.  In  1920  the 
eighty  percent  of  the  workers’  families  may  have  had  an 
average  income  of  $1500  or  $1600,  but  they  were  in  no  wise 
economically  better  off,  for  the  increase  in  the  cost  of  living 
was  greater  than  the  increase  in  their  wages. 

Changing  Living  Standards 

We  sometimes  hear  it  said  that  the  condition  of  the  wage 
earner  of  today  is  infinitely  superior  to  that  of  the  laborer 
of  several  centuries  ago ;  and  that  he  is  enjoying  comforts 
that  a  few  hundred  years  ago  would  have  been  considered 
luxuries  by  lords  and  kings  and  queens.  There  may  be  a 
measure  of  truth  in  this,  for  we  read: 

“The  houses,  even  of  the  rich  and  great,  were,  in  the 
sixteenth  century,  mostly  destitute  of  glass  windows;  and 
the  cottages  of  the  poor  were  not  only  universally  without 
them,  but  also  without  chimneys!  The  luxury  of  a  linen 
shirt  was  confined  to  the  higher  classes.  The  cloth  used  by 
the  bulk  of  the  people  was  mostly  of  home  manufacture; 
and,  compared  with  what  they  now  make  use  of,  was  at  once 
costly,  coarse  and  comfortless.  All  classes,  from  the  peer 
to  the  peasant,  were  universally  without  many  articles  the 
daily  enjoyment  of  which  is  now  deemed  essential  even  by 
the  poorest  individuals.”6 

This,  we  are  told,  was  the  general  condition  in  the  six¬ 
teenth  century.  By  the  nineteenth  century  the  condition 
of  the  “rich  and  great”  had  improved  considerabty.  But 
what  'about  those  who  labored  for  a  wage  ?  The  following 
from  the  same  work  throws  some  light  on  this  phase  of  our 
subject : 

6  “A  Descriptive  and  Statistical  Account  of  the  British  Empire,’'  by 
J.  R.  McCulloch.  Vol.  II,  Chap.  V. 


214 


The  New  Capitalism 


“The  Rev.  Mr.  Smith,  in  his  Agricultural  Survey  of 
Wigtown  and  Kirkcudbright,  published  in  1810,  gives,  on 
authority  of  persons  then  living,  the  following  details  with 
respect  to  the  state  of  husbandry,  and  the  condition  of  the 
people  towards  the  middle  of  last  century:  .  .  . 

“  ‘Their  houses  were  commonly  wretched  dirty  hovels, 
built  with  stones  and  mud,  thatched  with  fern  and  turf; 
without  chimneys ;  filled  with  smoke ;  black  with  soot ;  hav¬ 
ing  low  doors,  and  small  holes  for  windows,  with  wooden 
shutters,  or,  in  place  of  these,  often  stopped  with  turf,  straw, 
or  fragments  of  old  clothes.  .  .  . 

“  ‘Nothing  but  the  frugal,  penurious  manner  in  which 
the  peasantry  then  lived  could  have  enabled  them  to  subsist 
and  pay  any  rent  whatever.  Their  clothing  was  of  the 
coarsest  material;  their  furniture  and  gardening  utensils 
were  often  made  by  themselves ;  their  food  always  the  pro¬ 
duce  of  their  farms,  was  little  expensive,  consisting  chiefly 
of  oatmeal,  vegetables,  and  the  produce  of  the  dairy;  if  a 
little  animal  food  was  occasionally  added,  it  was  generally 
the  refuse  of  the  flock,  unfit  to  be  brought  to  the  market.  ’  1  ’ 

Living  Standards  Around  1850 

John  Stuart  Mill,  quoting  from  Mr.  Holyoake’s  History 
of  the  Rochdale  (Cooperative)  Society,  gives  a  glimpse  of 
the  condition  of  Rochdale  working  men  in  the  first  half  of 
the  nineteenth  century : 

‘  ‘  These  crowds  of  humble  working  men,  who  never  knew 
before  when  they  put  good  food  in  their  mouths,  whose 
every  dinner  was  adulterated,  whose  shoes  let  in  the  water 
a  month  too  soon,  whose  waistcoats  shone  with  devil’s  dust, 
and  whose  wives  wore  calico  that  would  not  wash,  now  buy 
in  the  markets  like  millionaires,  and  as  far  as  fineness  of 
food  goes,  live  like  lords.” 

One  may  criticize  the  rhetoric  of  Mr.  Holyoake  for  speak¬ 
ing  of  workmen  and  their  families  around  1850  buying 
“like  millionaires,”  and  living  “like  lords,”  but  whether 
or  no,  that  is  not  the  important  point,  as  far  as  we  are 


The  American  Standard  of  Living  215 


concerned.  That  their  economic  condition  was  materially 
improved  is  certain ;  the  important  point  is  that  no  thanks 
was  due  to  their  economic  overlords;  they,  the  workmen 
themselves,  improved  their  own  condition — raised  them¬ 
selves  to  a  higher  level  of  living,  in  spite  of  their  Capital¬ 
istic  masters. 

But  if  the  working  classes  of  England  “lived  like  kings’ ’ 
in  1850,  they  were  not  “living  like  kings”  in  the  year  of 
Our  Lord  1922.  There  are  today  several  million  unem¬ 
ployed  workers  in  England  who  subsist  on  doles,  precisely 
as  did  the  workers  a  century  ago  under  the  Poor  Laws.7 
Does  that  spell  economic  progress,  or  economic  retrogres¬ 
sion?  Can  the  workers  of  England  be  said  to  have  gone 
forward,  or  to  have  been  hurled  back? 

But  if  the  condition  of  the  wage  earners  in  the  United 
States,  or  elsewhere,  is  better  than  that  of  the  laborers  of 
a  century  or  two  ago,  no  thanks  is  due  to  the  “rich  and 
great” — to  lords  or  kings  or  queens,  who,  history  shows, 
would  have  preferred  to  keep  those  who  toil  in  perpetual 
bondage.  And  if  the  condition  of  the  nobles  and  aristocrats 
of  today — of  lords,  kings  and  queens,  is  vastly  better  than 
the  condition  of  the  lords,  kings  and  queens  of  former 
times,  who  deserves  the  credit?  Who  invented  the  thou¬ 
sand  and  one  things  that  have  added  to  their  comfort? 
Why,  those  who  toiled  for  a  wage,  a  meager  wage,  a  bare 
living  wage !  Who  has  a  better  right  to  share  in  comforts 
than  those  who  created  them ;  who  a  prior  right  to  the  con¬ 
veniences  added  to  life  than  those,  whose  skill  and  inge¬ 
nuity  called  them  into  existence? 

A  Boast  Blasted 

But  is  the  condition  of  the  wage  earner  of  today  so  much 
better 'than  that  of  the  laborer  around  1650,  when  the  labor 
of  husband  and  wife  and  two  children  old  enough  to  work 
were  required  to  earn  enough  to  enable  them  to  live? 

7  In  1910-11  over  a  million  people  in  Great  Britain  were  in  the 
poorhouse. 


216 


The  New  Capitalism 


Let  us  see.  According  to  the  latest  published  statistics, 
Thirteenth  Census  of  the  United  States,  1910 — in  1910  the 
total  number  of  persons  ten  years  of  age  and  over,  engaged 
in  the  principal  gainful  occupations,  was  38,167,336,  of 
which  30,091,564  were  males  and  8,075,772  were  females. 
Of  the  total  number  of  persons,  10,828,365  were  children 
between  the  ages  of  ten  and  fifteen  years  of  age,  divided 
as  follows:  boys — 5,464,228;  girls — 5,364,137.  This  means 
that  more  than  twenty-five  percent  of  all  wage  earners  are 
children,  an  important  point  to  remember,  especially  when 
computing  the  average  income  per  family. 

It  is  also  well  to  bear  in  mind  that  a  steadily  increasing 
number  of  wage  earners  are  women,  and  that  the  wages  of 
women  are  considerably  less  than  the  wages  of  the  male 
workers;  and  the  average  in  all  cases  below  what  could  be 
called  a  living  wage.  It  will  not  be  denied  that  there  is  a 
growing  number  of  married  women  who  find  it  necessary  to 
join  in  the  labor  of  the  husband  in  order  to  make  the  eco¬ 
nomic  ends  meet  or  enable  them  to  keep  the  ends  together. 
This  is  particularly  true  of  families  residing  in  the  big 
cities.  Fifteen  years  ago  it  might  have  been  said  that  a 
considerable  number  of  women  were  entering  the  ranks  of 
wage  earners,  not  so  much  driven  by  any  economic  necessity 
but  as  a  matter  of  choice,  merely  that  they  might  live  in 
better  style  and  enjoy  comforts  and  pleasures  which  they 
could  not  obtain  otherwise — a  not  unnatural  desire.  But 
this  is  less  markedly  true  today,  for  the  economic  pressure 
has  increased  tremendously  within  recent  years;  and  what 
was  once  a  matter  of  choice  has  now  become  more  a  matter 
of  necessity. 

When  it  becomes  necessary  in  order  to  maintain  a  fairly 
decent  living  standard,  for  wife  and  children  to  enter  the 
ranks  of  wage  earners,  you  have  taken  an  economic  step 
back  and  to  the  conditions  that  prevailed  two  and  three 
hundred  years  ago.  When  it  is  necessary,  as  it  was  in  1650, 
and  as  it  is  today,  for  wife  and  children  to  jointly  labor  to 


The  American  Standard  of  Living  217 


earn  the  amount  required  for  a  family  to  live,  no  real  eco¬ 
nomic  advance  has  been  made;  at  least  there  is  no  great 
reason  to  boast,  or  to  prate  of  “  a  higher  standard  of  living.  ’ 1 

The  New  Pauperism 

I  think  it  will  not  be  disputed  by  anyone  that  our  eco¬ 
nomic  system,  as  far  as  those  who  work  for  a  wage  or  salary 
are  concerned,  is  a  from  hand  to  mouth  system.  What  the 
average  wage  earner  receives  on  Saturday,  at  most  carries 
him  through  the  week.  With  regard  to  most  wage  earners, 
and  salaried  men  and  women,  it  would  be  entirely  safe  to 
say  that  the  wages  they  receive  pay  not  for  what  they  will 
consume,  but  for  what  they  have  already  consumed.  So, 
then,  the  economic  system  is  even  worse  than  a  from  hand 
to  mouth  system; — it  is,  more  correctly  speaking,  a  debtor 
system — by  virtue  of  which  the  wage  earner  is  kept  con¬ 
stantly  in  arrears,  in  a  state  of  chronic  indebtedness.  He 
consumes  before  he  earns.  That,  my  friends,  is  poverty  of 
the  direst  kind.  That  is  the  New  Pauperism  established  by 
the  Capitalistic  System.  From  a  condition  such  as  this  it 
is  only  a  step  to  the  economic  coolieism  of  China  and  India, 
and  the  peonage  of  Mexico. 

It  may  take  a  quarter  or  a  half  century  to  complete  the 
job  of  utterly  degrading  those  who  work  for  a  wage;  and 
unless  determined  opposition  not  only  by  organized  Labor, 
but  by  all  those  who  work  for  a  wage,  or  its  equivalent,  in 
brief  by  the  non-investor  group  is  offered,  the  Capitalistic 
program  will  succeed  beyond  a  doubt. 


CHAPTER  XVIII 
Mane — Tekel — Upharsin1 

i  From  the  Book  of  Daniel,  Chapter  V.  (1)  Belshazzar  the  king- 
made  a  great  feast  to  a  thousand  of  his  lords,  and  drank  wine  before 
the  thousand. 

(2)  And  being  now  drunk  he  commanded  that  they  should  bring 
the  vessels  of  gold  and  silver  which  Nebuchadnezzar  his  father  had 
brought  away  out  of  the  temple,  that  was  in  Jerusalem,  and  that  the 
king  and  his  nobles,  and  his  wives  and  his  concubines,  might  drink 
in  them. 

( 3  )  Then  they  brought  the  golden  vessels  that  were  taken  out  of  the 
temple  of  the  house  of  God,  which  was  at  Jerusalem,  and  the  king, 
and  his  princes,  his  wives,  and  his  concubines,  drank  in  them. 

(4)  They  drank  wine,  and  praised  the  gods  of  gold,  and  of  silver, 
of  brass,  of  iron,  of  wood,  and  of  stone. 

(5)  In  the  same  hour  came  forth  fingers  of  a  man’s  hand,  and 
wrote  over  against  the  candlestick  upon  the  plaster  of  the  wall  of 
the  king’s  palace  ;  and  the  king  saw  the  part  of  the  hand  that  wrote. 

(25)  And  this  is  the  writing  and  that  was  written.  Mane,  Tekel, 
Upharsin. 

(26)  This  is  the  interpretation  of  the  thing:  Mane;  God  hath 
numbered  thy  kingdom,  and  finished  it. 

(27)  Tekel;  Thou  art  weighed  in  the  balances,  and  found  wanting. 

(28)  Upharsin;  Thy  kingdom  is  divided,  and  given  to  the  Medes 
and  Persians. 


SCORES  of  writers  are  interpreting  the  greatly  dis¬ 
turbed  conditions  in  the  world  today  as  foreshadowing 
the  doom  of  civilization.  I  do  not  agree  with  these 
prophet  writers.  What  is  going  on  throughout  the  world 
does  not  signify  the  breakdown  of  civilization.  It  is  either 
the  prelude  to  the  utter  collapse  of  the  Capitalistic  System, 
or  else  a  trumpet  blast  of  triumph,  heralding  its  complete 
success. 

Long  before  the  war  I  had  written  down  this  sentence  in 
my  notebook: 

“The  Capitalistic  Entrepreneur  System  can  exist  for 
fifteen  or  perhaps  twenty  years.  Then  one  of  two  things 
must  happen:  either  it  will  break  down  completely;  or  it 
will  continue  to  maintain  itself  by  increasing  the  burdens 
upon  the  people ;  succeeding  in  which  it  will  grow  mightier 
and  more  tyrannical  with  the  passing  of  the  years/ 1 


218 


Mane — Tekel — U  pharsin 


219 


My  prediction  was  not  merely  a  guess ;  it  was  the  answer 
to  a  simple  problem  in  arithmetic,  as  simple  as  the  formula 
two  plus  two  makes  four.  In  1913  I  believed  (and  I  think 
I  was  right) — that  the  Capitalistic  Entrepreneur  System 
was  in  its  death  throes.  During  the  first  dozen  years  it 
maintained  itself  by  the  simple  process  of  raising  living 
costs.  But  since  prices  of  living  commodities  cannot  be 
raised  indefinitely  without  producing  a  reaction — for  there 
is  a  limit  beyond  which  the  patient  public  will  not,  or  more 
correctly  speaking  cannot,  go;  and  since  the  people  were 
beginning  to  murmur  and  to  think  aloud,  I  concluded  that 
the  end  of  the  System  was  imminent.  Only  a  war  of 
gigantic  proportions  could  save  it.  And  a  war  came. 

Making  the  World  Safe  for  Timocracy 

Aristotle  tells  us  that  there  are  three  political  constitu¬ 
tions:  Kingship  (or  monarchy),  aristocracy,  and  timocracy, 
which  latter  “people  generally  call  constitutional  govern¬ 
ment.  ”  “Of  these,”  says  Aristotle,  “timocracy  is  the 
worst.  ’  ’  Timocracy,  he  explains,  ‘  ‘  recognizes  the  principle 
of  wealth.” 

The  World  War,  we  were  told,  was  fought  to  “make  the 
world  safe  for  Democracy.”  The  war  did  nothing  of  the 
kind.  It  made  the  world  safe  for  TIMOCRACY — for  the 
rule  of  wealth.  No  historian  will  ever  say,  or  attempt  to 
show,  that  the  World  War  of  1914-18  was  deliberately 
planned  and  provoked  by  the  Capitalistic  groups  of  Europe 
and  the  United  States  working  in  unison;  but  the  phil¬ 
osopher  and  student  of  history  will  have  no  difficulty  in¬ 
showing  that  the  fates  have  a  way  of  playing  right  into 
their  hands.  The  International  bankers  (among  whom  the 
United  States  bankers  are  dominant  at  present)  have  been 
and  are,  the  chief  beneficiaries  of  the  recent  war.  The  ill 
wind  that  fanned  the  fierce  flames  of  the  holocaust,  almost 
destroying  the  whole  civilized  world,  blew  good  only  to 
them.  For  one  thing  the  Capitalistic  System  was  saved 
from  collapse. 


220 


The  New  Capitalism 


Moreover,  the  well  nigh  universal  misery  and  wretched¬ 
ness  produced  by  the  war  gave  it  a  new  lease  on  life,  and  a 
tighter  grip  on  the  throat  of  the  world;  for,  when  people 
are  reduced  to  poverty  and  beggary,  they  are  docile  and 
submissive.  There  is  a  popular  belief  that  hunger  makes 
men  desperate.  That  is  a  fallacy.  Show  me  a  nation  where 
hunger  is  chronic  and  starvation  stalks,  and  I’ll  show  you 
a  nation  that  is  slavish,  submissive,  docile  and  unresisting. 
There  is  no  fight  in  people  weakened  by  hunger.  Far  from 
being  desperate  they  are  grateful  for  the  few  husks  thrust 

before  them  as  before  swine. 

• 

The  Capitalistic  Program 

But  I  do  not  want  to  pursue  this  distressingly  seductive 
theme  further.  I  must  hurry  along.  What  I  have  said 
above  was  for  the  purpose  of  emphasizing  what  to  my  way 
of  thinking  is  the  clear  intent  of  the  Capitalistic-Mammon- 
istic  group  constituting  the  Capitalistic-Mammonistic  Sys¬ 
tem  in  the  United  States — viz.,  to  reduce  the  people  of  the 
United  States  to  a  condition  of  helpless  poverty  and  abject 
servility.  That  is  the  Capitalistic  program,  and  quite  a 
few  numbers  have  already  been  played.  The  performance 
is  going  well,  and  with  a  flourish.  Whether  I  am  right  or 
wrong  in  saying  that  the  war  saved  the  Capitalistic  System 
from  disaster,  it  is  clear  that  since  the  war  the  Capitalistic 
group  has  acquired  an  excess  of  confidence  in  its  impreg¬ 
nability,  and  a  renewal  of  faith  in  its  ability,  not  only  to 
conserve  itself  perpetually  but  to  strengthen  itself  still 
more;  and  to  crush  its  antagonists.  The  war  and  its  con¬ 
sequences  seem  to  have  beguiled  those  constituting  the  Cap¬ 
italistic  group  into  the  belief  that  the  Capitalistic  System 
they  have  established,  can  be  made  to  endure  forever. 

Reaching  Out  for  More 

Not  content  with  having  acquired  control  and  practical 
ownership  of  all  the  profitable  properties  in  the  United 
States — the  banks,  insurance  companies,  transportation 


Mane- — Tekel — U  pharsin 


221 


systems,  public  utilities,  natural  resources,  raw  materials, 
and  leading  industries — they  are  now  reaching  out  to 
gobble  into  their  maw  those  properties  overlooked,  or  con¬ 
sidered  of  minor  importance  during  the  first  twenty  years 
of  their  regnancy.  Scores  of  ‘‘news”  items  have  appeared 
during  the  past  year  clearly  indicating  what  is  going  on  in 
the  Capitalistic  mind.  A  brief  excerpt  from  a  single  article 
by  a  well  known  financial  writer,  B.  C.  Forbes,  will  suffice 
to  illustrate  the  point : 

“Wall  Street  rumor  is  busy  forming  two  ambitious  steel 
combinations,  a  comprehensive  coal  consolidation,  oil  mer¬ 
gers  galore,  the  welding  together  of  various  important  cop¬ 
per  companies,  annexations  of  automobile  plants  by  larger 
ones,  and  other  assimilations  of  similar  units  by  trusts  of 
influential  independents.  .  .  . 

“Moreover,  our  brainiest  financial  and  industrial  giants 
do  not  confine  their  reckonings  to  the  present  surplus  of 
productive  capacity.  They  look  ahead,  and,  looking,  they 
foresee  the  time  when  America  will  require  vastly  greater 
productive  capacity  than  now  exists. 

“When  that  time  comes — and  there  is  little  doubt  that 
it  is  coming — everything  will  be  right  for  the  flotation  of 
mergers. 

“If  the  Washington  conference  achieves  the  results  Presi¬ 
dent  Harding  joyously  predicts,  the  way  will  be  paved  for 
the  summoning  of  international  financial  leaders  to  a  con¬ 
ference  which  may  also  contrive  to  evolve  workable  plans 
for  getting  the  world  back  on  its  feet.  ’  ’2 

The  W orld  on  Its  Bach 

Read  with  especial  care  the  last  paragraph  of  the  above 
item.  Note  the  reference  to  the  “international  financial 
leaders,”  and  who,  we  are  told,  may  “contrive  to  evolve 
workable  plans  for  getting  the  world  back  on  its  feet.  ’  ’  To 
my  humble  way  of  thinking  the  “international  financial 
leaders”  (among  whom  our  American  Investment  bankers 


2  Chicago  Herald-Examiner,  December  13,  1921. 


222 


The  New  Capitalism 


are  conspicuous),  are  laying  plans,  not  so  much  to  get  the 
world  back  on  its  feet  as  to  get  it  on  its  back,  and  then  to 
plant  their  feet  on  its  face. 

The  war  has  given  our  former  Investment  bankers  their 
opportunity  to  become  International  bankers;  and  when 
the  “ workable  plans”  of  the  ‘ ‘ international  financial  lead¬ 
ers”  are  completed  I  hold  it  will  be  discovered,  perhaps 
too  late,  that  a  few  thousand  individuals  are  holding  the 
economic  destinies  of  all  the  peoples  of  the  earth — includ¬ 
ing  the  United  States — in  the  hollow  of  their  hand.  Euro¬ 
pean  students  of  economic  problems  have  long  ago  awak¬ 
ened  to  a  realization  of  what  is  going  on  the  in  the  Interna¬ 
tional  Capitalistic  mind.  They  speak  quite  plainly  of  “the 
international  cooperation  of  Capitalism” — and  boldly  de¬ 
clare  that  the  plan  is  “to  impose  new  standards  of  living 
on  the  proletariate  of  Europe.”3 4  Indeed  the  economic 
subjugation  of  the  people  of  Europe  is  already  accom¬ 
plished.  There  remains  but  to  subdue  us. 

The  One  Hindrance  in  the  Capitalistic  Road 

The  only  obstacle  in  the  way  of  the  complete  success  of 
the  plans  of  the  Capitalistic  potentates  is  organized  Labor 
in  the  United  States,  and  every  effort  is  being  made  to 
crush  it  out  of  existence.  One  of  the  chief  weapons, — the 
scientific  employment  of  which  was  made  possible  by  the 
universal  havoc  produced  by  the  war,  against  organized 
Labor,  is  what  is  called  ‘  ‘  our  ’  ’  foreign  investments.  Ameri¬ 
can  capital  is  being  “invested”  by  American  International 
“investors,”  in  immense  quantities  in  European  industries, 
and  in  sundry  enterprises  in  other  foreign  lands.  Ameri¬ 
can  Capital! — that  is  to  say — the  savings  of  the  wage- 
earners,  the  non-investors,  or  the  credit  based  on  their  sav¬ 
ings,  is  being  “invested”  (God  save  the  mark!)  particu- 

3  M.  Philipps  Price  in  Labor  Monthly  (February  15,  19-22),  a  British 
Magazine  of  International  L*abor. 

4  “More  than  $2,000,000,000  of  American  capital  is  now  invested 
in  foreign  enterprises  paying  dividends  of  hundreds  of  millions  of 
dollars,  and  the  volume  of  American  investment  abroad  is  increasing 
daily.”  Arthur  Sears  Henning,  Chicago  Tribune ,  April  2,  1922.  Mr. 
Henning,  it  would  seem,  is  ultra- conservative. 


Mane — Tekel — Upharsin 


223 


larly  in  European  industries  where  labor,  as  everyone 
knows,  is  poorly  rewarded.  And  in  due  time  the  cheaper 
product  of  the  poorly  paid  European  labor,  financed  with 
the  savings  of  American  wage-earners,  will  be  dumped  in 
increasing  quantities  into  the  American  market  in  competi¬ 
tion  with  the  output  of  American  workmen.  As  a  result 
hundreds  of  thousands,  if  not  millions,  of  American  work¬ 
men  will  be  subjected  to  inconstancy  of  employment,  and 
their  families  to  the  hardships  and  misery  following  en¬ 
forced  idleness.  Thus  a  permanently  “mobile  labor  sup¬ 
ply’’  the  great  Capitalistic  desideratum ,  will  have  been 
created,  and  from  that  day  forward  wage  workers  in  the 
United  States  must  accept  the  low  wages  that  Capital  offers. 
Besides,  there  is  no  better  way  of  keeping  the  other  millions 
who  are  fortunate  enough  to  have  jobs,  quiet  and  tractable, 
than  to  keep  the  alternative  of  losing  their  jobs  dangling 
constantly  before  their  eyes. 

The  “Lodged  and  Ancient  Grudge ”  Against 

Labor 

Today  those  who  own  the  nation’s  wealth  and  control 
the  nation’s  money  and  credit,  more  than  ever  look  upon 
those  who  work  for  a  wage  as  a  necessary  evil  to  be  en¬ 
dured  only  because  vast  profit  accumulations,  and  the  still 
greater  concentration  of  the  nation’s  wealth  in  the  hands 
of  a  small  coterie  of  Mammonistic  Capitalists  demands  their 
continued  existence. 

Today  organized  Capital,  more  than  ever,  looks  upon 
organized  Labor  as  ‘ 4  the  abomination  of  abominations  ’  ’ — as 
something  intolerable  and  to  be  utterly  destroyed.  Indeed 
the  work  of  destruction  which  began  many  years  ago  has 
progressed  to  a  point  where  organized  Labor,  outmaneu- 
vered  at  every  turn,  finds  itself  at  this  very  moment  des¬ 
perately  hard  pressed. 

The  fight  between  Capital  and  Labor — (it  was  never  any¬ 
thing  less  than  a  fight;  let  those  who  sincerely  believe,  or 
insincerely  pretend  to  believe,  that  Capital  and  Labor  are 


224 


The  New  Capitalism 


more  amiably  disposed  toward  each  other,  hug  the  delusion 
to  their  hearts) — the  fight  between  Capital  and  Labor  is 
getting  fiercer  and  bitterer.  We  can  indeed  say,  and  quite 
truly,  that  Capital  and  Labor  are  getting  closer  together — 
to  each  other’s  throats;  closer  to  each  others  hearts,  but 
there  is  a  knife  in  the  hand  of  each. 

“Divide  and  Conquer ” 

Machiavelli  ?s  notorious  work,  “The  Prince”  (published 
A.  D.  1532),  is  a  “scientific  account  of  the  art  of  acquiring 
and  preserving  despotic  power,  and  a  calm,  unvarnished 
and  forcible  exposition  of  the  means  by  which  tyranny  may 
be  established  and  maintained.”  “Divide  and  Conquer!” 
is  an  old  slogan,  and  the  favorite  formula  of  tyrants  and 
despots,  of  politicians  and  Mammonistic  Capitalists  who 
have  learned  from  centuries  of  experience  that  as  long  as 
they  can  keep  people  from  uniting — or  better  still — quar¬ 
relling  among  themselves — thus  keeping  them  divided — 
they  are  safe. 

Capitalism  easily  surpasses  the  Machiavellian  code  in  the 
employment  of  ingenious  tactics.  First  it  divided  wage 
earners  into  opposing  groups — the  organized  workers  and 
the  unorganized  workers ;  and  then  it  subdivided  each  group 
into  contentious  factions.  In  the  case  of  the  unorganized 
workers  in  certain  important  industries,  those  of  foreign 
birth  predominate.  The  difference  of  languages  keeps  them 
not  only  apart  but  in  turmoil.  Whereas  in  the  organized 
groups  we  find  greater  homogeneity,  but  bitter  antagonism 
between  radicals  and  conservatives.  Besides  there  are  many 
other  elements  of  disintegration  and  destruction  at  work. 

The  Capitalistic  Coup  d’etat 

But  the  greatest  achievement  of  Capitalism  is  that  it  has 
succeeded  in  inaugurating  a  nation-wide  system  of  espio¬ 
nage.  Thousands  of  hireling  agents — “under-cover  men” 
or  “operatives”  they  are  called,  have  been  hired  to  mingle 
with  workmen,  to  win  their  confidence  and  then  to  betray 


Mane — Tekel — U  pharsin 


225 


them.  The  information  obtained  is  frequently  used  to  dis¬ 
criminate  against  members  of  unions.  This  is  ‘ ‘boring  from 
within”  with  a  vengeance.  Espionage  has  been  developed 
into  a  system,  and  the  results  achieved  thus  far  seem  to  be 
eminently  satisfactory  to  the  Capitalistic  group.  Through 
this  system  of  espionage  existing  labor  unions  have  been 
disrupted  and  disorganized.  But  particularly  does  it  aim 
to  make  organization  impossible. 

The  supplementary  report  recently  published  by  the  In¬ 
terchurch  World  Movement  exposes  the  system  and  its 
workings,  and  shows  that  it  is  one  of  the  basest  inventions 
of  modern  Capitalism.  It  shows  conclusively  that  “the 
existence  of  widespread,  well  financed,  privately  incorpo¬ 
rated  spy  concerns  constitutes  an  integral  part  of  industrial 
corporations’  policy  of  ‘not  dealing  with  labor  unions’  ” 
and  that  these  Capitalistic  hireling  agents,  “under-cover 
men,”  or  “operatives,”  are  “inside  the  plants,  or  inside 
the  unions,  or  outside  both,  and  during  the  strike  (of  1919) 
spied,  secretly  denounced,  engineered  raids  and  arrests,  and 
incited  to  riot.”  Some  of  these  “spies”  working  for  the 
Capitalists,  get  into  the  labor  unions,  assume  leadership 
and  manage  to  have  themselves  elected  to  important  offices. 
Needless  to  say,  to  create  dissension  within  unions,  and  to 
discredit  labor  organizations  in  the  eyes  of  the  public,  is 
one  of  the  big  aims  of  the  Capitalistic  espionage  system.5 

In  addition  to  the  organized  Capitalistic  “Service”  Com¬ 
panies — that  is  Spy  Service  placed  at  the  disposal  of  any 
Capitalistic  employer  for  a  price — some  of  the  larger  cor¬ 
porations  maintain  a  spy  system  of  their  own.  Mr.  Atter- 
bury,  Vice-President  of  the  Pennsylvania  lines,  testified 
before  the  Railroad  Labor  Board  (March  22,  1921)  that 
his  railroad  “maintained  an  extensive  spy  and  espionage 
system  among  its  employees”  and  that  it  “had  little  ars¬ 
enals  at  various  plants  where  guns  and  ammunition  were 

5  Whoever  is  interested  in  this  phase  of  the  subject  is  advised  to 
read  “Public  Opinion  and  the  Steel  Strike  of  1919” — the  supplementary 
Report  to  the  Commission  of  Inquiry,  Interchurch  World  Movement. 
Published  by  Harcourt  Brace  &  Co.,  New  York. 


226 


The  New  Capitalism 


kept.”  To  maintain  this  “police”  system  the  Pennsyl¬ 
vania  railroad  spends  $800,000  a  year,  which,  of  course, 
the  public  pays. 

The  “Open  Shop ”  Campaign 

For  more  than  twenty  years  the  Capitalistic  group  has 
been  preparing  for  the  time  when  with  little  or  no  danger 
to  itself  it  might  give  the  death  blow  to  organized  Labor. 
That  time  has  arrived.  The  war  greatly  strengthened  the 
Capitalistic  group ;  while  its  consequences  placed  those  who 
work  for  a  wage  into  an  unfavorable  position.  And  Mam- 
monistic  Capitalism  came  forward  with  a  well  thought  out 
plan — a  thoroughly  organized,  a  thoroughly  systematized 
campaign,  to  render  organized  Labor  hors  de  combat. 

Needless  to  say  Capitalism  did  not  label  its  campaign  “a 
campaign  to  destroy  organized  Labor”;  that  would  have 
been  crude,  and  I,  who  have  observed  and  studied  Capi¬ 
talistic  tactics  and  strategy  for- many  years,  am  the  last  one 
to  accuse  the  Machiavellian  Capitalistic  group  of  crudeness. 
Not  only  is  the  Capitalistic  campaign  to  destroy  organized 
Labor  not  called  by  its  right  name,  but  it  is  cleverly  dis¬ 
guised  as  a  pseudo  patriotic  movement — ‘  ‘  A  Campaign  for 
the  Open  Shop — the  American  Plan,”  it  is  called.  And 
“Citizens”  Committees  with  millions  of  dollars  at  their 
disposal  have  been  formed  in  strategic  places — pledged  not 
to  let  up  in  the  fight  until  organized  Labor  is  destroyed 
root  and  branch. 

Superficial  students  of  industrial  and  economic  subjects 
are  under  the  impression  that  the  campaign  for  an  Open 
Shop,  which  in  reality  is  a  fight  against  organized  Labor, 
began  towards  the  end  of  1919.  They  are  in  error.  The 
fight  against  the  closed  shop  (more  properly  speaking, 
against  organized  Labor)  began  on  June  17,  1901.  Six 
weeks  after  the  Steel  Corporation  was  organized  and  began 
operations,  a  meeting  of  the  executive  committee  was  held 
in  New  York  city.  But  so  as  not  to  be  accused  of  misstate¬ 
ment,  or  prejudice,  let  me  quote  what  happened  at  that 


Mane — Tekel — Upharsin 


227 


meeting  from  the  official  report  of  the  Congressional  Inves¬ 
tigation  of  the  United  States  Steel  Corporation : 

Labor  Unions 

“The  attitude  of  the  United  States  Steel  Corporation 
toward  organized  Labor  was  early  determined.  On  June 
17,  1901,  six  weeks  after  the  Steel  Corporation  was  organ¬ 
ized  and  began  operations,  a  meeting  of  the  executive  com¬ 
mittee  was  held  in  New  York  City.  At  this  meeting  Mr. 
Charles  Steele,  then  a  member  of  the  firm  of  J.  P.  Morgan 
&  Co.,  and  also  a  member  of  the  executive  committee  of  the 
Steel  Corporation,  was  present.  The  question  of  the  atti¬ 
tude  of  the  corporation  toward  organized  labor  was  exten¬ 
sively  discussed  at  this  meeting.  As  a  final  result  of  the 
deliberations  of  the  executive  committee,  Mr.  Steele  brought 
forward  the  following  proposition,  which  the  records  show 
was  finally  voted  upon,  and  the  president  of  the  Steel  Cor¬ 
poration  instructed  to  convey  it  to  the  presidents  of  the 
subsidiary  companies,  to  wit : 

“That  we  are  unalterably  opposed  to  any  extension 
of  union  labor  and  advise  subsidiary  companies  to  take 
firm  position  when  these  questions  come  up  and  say 
that  they  are  not  going  to  recognize  it,  that  is,  any  ex¬ 
tension  of  unions  in  mills  where  they  do  not  now  exist; 
that  great  care  should  be  taken  to  prevent  trouble,  and 
that  they  promptly  report  and  confer  with  this  corpo¬ 
ration. 

“Following  that  declaration,  the  evidence  clearly  shows 
how  American  laborers  felt.  Justly  or  unjustly,  they  con¬ 
sidered  themselves  persona  non  grata  in  the  works  of  the 
United  States  Steel  Corporation.  Thereafter  the  great  bulk 
of  American  union  laboring  men  in  the  iron  and  steel  in¬ 
dustry  understood  that  they  were  not  wanted  at  the  works 
of  the  United  States  Steel  Corporation.  The  process  of 
filling  the  places  of  these  union  laborers  is  interesting  and 
important  to  observe.  American  laborers  loyal  to  their 


228 


The  New  Capitalism 


unions  could  not  be  had.  Something  had  to  be  done  to  get 
laborers.  Southern  Europe  was  appealed  to.  Hordes  of 
laborers  from  Southern  Europe  poured  into  the  United 
States.  They  were  almost  entirely  from  the  agricultural 
classes,  knew  absolutely  nothing  about  iron  and  steel  manu¬ 
facture,  but  were  sufficient  to  fight  the  labor  unions.  They 
were  absolutely  unskilled,  but  they  could  work,  especially 
as  common  laborers.  In  times  of  special  necessity  even  ad¬ 
vertisements  for  foreign  help  of  this  class  were  spread 
broadcast.  A  sample  of  these  advertisements,  which  the 
evidence  shows  were  caused  to  be  circulated  by  subsidiary 
companies  of  the  Steel  Corporation,  is  as  follows : 

“  WANTED. — Sixty  tin  house  men ,  tinners ,  catchers ,  and 
helpers  to  work  in  open  shops;  Syrians,  Poles,  and  Rouma¬ 
nians  preferred;  steady  employment  and  good  wages  to  men 
willing  to  work ;  fare  paid  and  no  fees  charged  for  this 
work.  Central  Employment  Bureau,  628  Pennsylvania 
Avenue. 

“This  advertisement  appeared,  as  the  evidence  shows,  in 
the  Pittsburgh  Gazette-Times  of  July  14,  1909.  (See  page 
3074  of  hearings.) 

“The  result  is  that  about  eighty  percent  of  th*  unskilled 
laborers  in  the  steel  and  iron  business  are  foreigners  of  this 
class.  With  the  benefit  of  a  skilled  American  foreman  such 
a  crew  can  work  out  results  in  unskilled  labor  production. 
The  profits  of  this  system  of  labor  employment  go  to  the 
Steel  Corporation,  while  the  displaced  American  workman 
shifted  as  best  he  could. 

“Following  the  elimination  of  Union  labor,  and  the  in¬ 
troduction  of  the  above-described  foreign  laborers,  an  inves¬ 
tigation  was  made  as  to  the  conditions  of  laborers,  hours  of 
labor,  home  life,  etc.  As  to  the  hours  of  labor,  the  evidence 
before  the  committee  was  conclusive  that  long  hours  of  labor 
prevailed  in  the  iron  and  steel  industry,  especially  in  the 
unskilled  departments.  Under  the  direction  of  the  United 
States  Commissioner  of  Labor,  a  very  careful  and  thorough 
investigation  as  to  the  hours  of  labor  in  the  steel  industry 


Mane — Tekel — Upharsin  229 

has  been  made.  From  this  official  report  we  quote  without 
comment : 

“During  May,  1910,  the  period  covered  by  this  investi¬ 
gation  into  the  steel  industry,  50,000  persons,  or  20  percent 
of  the  153,000  employees  of  the  blast  furnaces,  steel  works, 
and  rolling  mills  covered  by  this  report,  customarily  worked 
seven  days  per  week,  and  20  percent  of  them  worked  84 
hours  or  more  a  week,  which,  in  effect,  means  a  12  hour 
working  day  in  the  wTeek,  including  Sunday. 

‘ 1  This  hardship  of  12  hour  days  and  a  7  day  week  is  still 
further  increased  by  the  fact  that  every  wTeek  or  two  weeks, 
as  the  case  may  be,  when  the  employees  on  the  day  shift 
are  transferred  to  the  night  shift,  and  vice  versa,  employees 
remain  on  duty  without  relief  either  18  to  24  consecutive 
hours,  according  to  the  practice  adopted  for  the  change  of 
shifts.  The  most  common  plan  to  effect  this  change  of  shift 
is  to  work  one  shift  of  employees  on  the  day  of  change 
through  the  entire  24  hours,  the  succeeding  shift  working 
the  regular  12  hours  when  it  comes  on  duty.  (See  page 
2837 ,  hearings.) 

1 1  While  we  deem  it  unnecssary  to  quote  the  testimony  of 
other  witnesses,  it  is  true,  as  the  testimony  shows,  that  they 
fully  corroborate  these  statements  of  the  United  States 
Commissioner,  and,  in  fact,  some  of  the  witnesses  are  much 
stronger  in  their  statements. 

“As  to  the  daily  lives  and  conditions  of  living  of  these 
laborers,  the  testimony  taken  is  voluminous,  far  too  exten¬ 
sive  to  even  summarize  in  this  report.  The  testimony  cer¬ 
tainly  shows  conditions  undesirable,  and  far  below  what  is 
ordinarily  understood  to  be  the  American  standard  of  living 
among  laborers  in  our  country.  Some  of  the  details  are 
revolting,  both  as  to  sanitary  and  moral  conditions.  Taking 
the  ordinary  family  as  a  unit,  the  wages  paid,  even  if  the 
head  of  the  family  is  constantly  employed,  are  barely 
enough  to  provide  subsistence.  ’ ,e 

6  Quotations  from  United  States  Steel  Corporation  Investigation. 
These  living  conditions  were  found  to  exist  among  steel  workers  in 
the  United  States  Steel  Corporation  ten  years  ago. 


230 


The  New  Capitalism 


The  American  Plan 

From  this  excerpt  from  an  official  Government  report 
you  can  judge  for  yourself  what  is  at  the  bottom  of  the 
Capitalistic  “American  Plan.”  The  present  campaign  for 
an  “American  Plan”  is  but  the  corollary  of  that  other 
American  plan  inaugurated  by  the  United  States  Steel  Cor¬ 
poration  when  in  its  fight  upon  organized  Labor,  more  than 
twenty  years  ago,  it  began  to  fill  its  plants  with  cheaper 
European  labor,  replacing  native  and  naturalized  Ameri¬ 
can  citizens  with  recent  arrivals, — immigrants  from  all 
parts  of  Europe.  The  present  “American  Plan”  is  Capi¬ 
tal^  last  desperate  charge  upon  organized  Labor.  And 
the  hidden  design  is  to  reduce  all  those  who  labor,  whether 
for  a  wage  or  salary,  to  a  condition  of  perpetual  servility 
and  permanent  poverty. 

Dragging  Down  the  Salaried  Employees 

Let  none  imagine  that  the  Capitalistic  System  intends 
merely  to  degrade  the  industrial  wage  earners  to  a  common 
level.  No !  The  Capitalistic  System  is  thorough ;  it  does 
nothing  by  halves.  Its  campaign  to  “liquidate  labor” — 
to  cut  wages  below  the  decent  living  level — includes  the 
salaried  employees.  Hundreds  of  thousands  of  salaried 
men  and  women  throughout  the  United  States  were  dis¬ 
charged  during  the  slack  period,  then  hired  back  at  a  lower 
salary,  or  replaced  by  cheaper  help. 

Items  such  as  the  following  appeared  frequently  in  the 
daily  press  during  the  past  year : 

“The  Pittsburgh  Coal  Company  will  make  reductions 
of  15  percent  on  September  1  in  the  wages  of  between  3,000 
and  4,000  members  of  its  salaried  staff.  ’  ’ 

“A  10  percent  pay  reduction,  effective  October  1,  is  an¬ 
nounced  by  the  E.  I.  DuPont  de  Nemours  Company.  The 
cut  will  affect  all  salaries  from  the  president  down.”7 

7  These  items  appeared  in  the  Chicago  Herald-Examiner.  August 
31,  1921. 


Mane — Tekel — U  phar  sin 


231 


In  an  article  entitled  ‘'The  White-Collar  Job  and  the 
Big  Jolt”  by  James  H.  Collins,  in  The  Saturday  Evening 
Post  (September  3,  1921),  a  “New  York  Employment  spe¬ 
cialist  ’  ’  is  quoted.  That  gentleman  divides  the  workers  into 
three  great  groups — :  Industrial,  Agricultural  and  Market¬ 
ing — this  latter  being  composed  of  those  engaged  in  mer¬ 
cantile  trade,  clerical  and  sales  work,  etc. — in  brief  the 
salaried  class.  According  to  this  “specialist”: 

“When  re-adjustment  comes  in  the  marketing  group 
prices  will  drop,  people  will  be  able  to  buy  more  with  their 
wages,  and  production  will  gradually  be  restored.”  The 
“re-adjustment,”  of  course,  has  reference  to  the  cutting 
of  salaries. 

A  brief  excerpt  from  Mr.  Collins’  article  suffices  for  the 
present  to  give  point  to  my  statement  that  the  campaign 
to  reduce  wages  includes  salaried  employees : 

‘  ‘  Reduction  of  the  salaried  staffs  has  proceeded,  industry 
by  industry,  as  different  lines  of  business  have  been  affected 
by  the  depression.  It  began  with  silks  in  the  spring  of 
1920,  ran  into  clothing  and  shoes,  spread  from  manufac¬ 
turer  to  jobber,  and  jobber  to  retailer,  invaded  automobiles 
and  farm  implements.  One  industry’s  hard  times  some¬ 
times  made  brisk  times  for  another  line  of  business,  as  with 
exporting,  where  cancellations  and  accumulated  goods  in 
foreign  ports  threw  work  upon  banks  and  branches  abroad. 
But  eventually  banking  organizations  were  affected,  the 
peak  of  employment  being  reached  in  that  line  about  last 
February,  when  it  became  necessary  to  cut  bank  staffs  five 
to  ten  percent,  letting  executives  go,  along  with  clerical 
workers. 

“Every  employment  organization,  whether  semi-public, 
like  the  Knights  of  Columbus  and  the  Young  Men’s  Chris¬ 
tian  Association,  or  the  purely  private  business  enterprise, 
reports  about  the  same  conditions — more  salaried  men  seek¬ 
ing  work  than  ever  before  in  their  history,  ten  applicants 
for  every  position,  and  anxious  inquiries  from  unemployed 
salaried  people  in  other  places  who  imagine  that  conditions 


232 


The  New  Capitalism 


are  better  elsewhere,  and  want  to  crowd  into  the  already 
congested  cities.’ ’ 

Cannot  the  salaried  employees  read  their  doom  between 
the  lines  ¥ 

The  One  Thing  Capitalism  Cannot  Destroy 

Will  the  Capitalistic  group  and  System  succeed  in  de¬ 
stroying  organized  Labor,  and  reducing  all  those  who  labor 
to  the  ranks  of  serfs?  When  we  consider  what  the  Capi¬ 
talistic  group  has  already  accomplished  and  that  organized 
Labor’s  condition  has  never  been  so  precarious  as  at  pres¬ 
ent,  one  is  tempted  to  answer  the  question  in  the  affirma¬ 
tive. 

But  in  spite  of  all  the  seeming  successes,  in  the  face  of  all 
the  past  Capitalistic  victories,  I  ’ll  say  with  all  the  emphasis 
I  can  command,  that  Mammonistic  Capitalism  will  not  suc¬ 
ceed — that  it  will  not  triumph.  Why  ¥  Because  it  has  over¬ 
looked  a  very  vital  point.  I  ’ll  tell  you  what  I  mean. 

When  M.  Clemenceau  was  urged  by  some  of  the  French 
deputies  to  bring  about  the  utter  destruction  of  Germany 
by  dismemberment,  Clemenceau  answered  that  to  dismem¬ 
ber  Germany  would  be  an  easy  task,  but  that  there  is  one 
thing  that  he  could  not  hope  to  succeed  in  destroying,  and 
this  one  thing  is  the  unity  of  spirit  of  the  German  people. 

“There  is  no  unity  deeper  than  the  unity  of  spirit,”  he 
said,  “and  that  unity  no  human  hand  can  touch.  You  do 
not  create  or  destroy  unity  by  diplomacy.  It  is  something 
that  exists  in  the  hearts  of  men.  We  love  what  we  love,  we 
hate  what  we  hate.  When  the  moment  of  peril  comes  we 
know  what  side  to  take;  when  the  call  to  battle  is  heard, 
we  know  where  to  stand.  ’  ’8 

This  is  a  lesson  of  history  that  the  Bourbon  Mammon¬ 
istic  Capitalists  have  never  learned.  If,  as  the  wise  states¬ 
man  Clemenceau  well  said,  you  cannot  destroy  unity  of 
spirit  by  diplomacy,  history  shows  that  it  can  much  less  be 
destroyed  by  violence!  It  is  quite  possible  that  Mammon - 


s  The  Living  Age ,  July  17,  1920. 


Mane — Tekel — TJpharsin 


233 


istic  Capitalism  will  succeed  in  seriously  harassing  organ¬ 
ized  Labor  for  a  time.  Let  us  go  so  far  as  to  say  that  it 
will  succeed  in  crushing  it  entirely,  even  trampling  it  un¬ 
derfoot  for  a  while.  But  it  will  be  a  sorry  and  brief  victory 
for  Mammonistic  Capitalism,  for  out  of  the  trials  and  tribu¬ 
lations  to  which  Mammonistic  Capitalism  is  at  present  sub¬ 
jecting  all  those  who  work  for  a  wage,  or  salary;  out  of 
the  smouldering  embers  of  their  common  resentment,  there 
will  arise,  phoenix-like,  a  spirit  of  unity  and  solidarity,  and 
a  unanimity  of  action  that  will  break  every  link  in  the 
Capitalistic-Mammonistic  chain  that  binds  them.  Torn  and 
tortured,  bruised  and  bleeding, — organized  and  unorgan¬ 
ized  Labor  will  pick  itself  up  out  of  the  dust  and  dirt,  bind 
up  its  wounds  and  retire  long  enough  to  let  them  heal. 
Then,  its  teeth  set,  its  fists  clenched,  and  its  face  calmly 
turned  toward  the  future,  full  panoplied,  and  accoutered 
as  never  before,  it  will  emerge  for  a  bigger  and  mightier 
contest  than  the  world  has  ever  seen.  It  will  have  learned 
the  secret  of  its  own  weakness,  which  is  a  disunited  front. 
If  those  who  work  for  a  wage,  men  and  women,  organized 
and  unorganized,  will  learn  this  one  lesson,  their  tempo¬ 
rary  defeat  will  turn  into  a  tremendous  and  lasting  victory. 

The  Mammonistic  Conquest 

Throughout  these  chapters  I  have  used  the  word  CAPI¬ 
TALISM ,  not  because  it  accurately  described  what  I  have 
in  mind,  or  existing  conditions,  but  because  Capitalism 
conveys  to  the  popular  intelligence  more  than  its  superla¬ 
tive  designation  MAMMONISM. 

Mammon  was  the  Syrian  god  of  riches.  The  rich,  the 
greedy  ,the  avaricious  worshipped  at  his  altar.  Capitalistic 
Mamihonism,  or  Mammonistic  Capitalism  as  we  know  it  to¬ 
day,  is  the  sordid  greed  for  wealth ;  the  vulpine  hunger  for 
riches ;  a  vulturous  appetite  for  profits,  a  ravenous  craving 
for  emoluments,  a  fiendish  lust  for  power,  and  many  other 
things  that  cannot  be  described  in  polite  language. 


234 


The  New  Capitalism 


It  must  be  clear  to  whosoever  has  carefully  followed  me 
thus  far,  that  the  Capitalistic-Mammonistic  conquest  of  the 
people  of  the  United  States  is  well  nigh  completed.  A 
small  group  of  Mammonists,  who  are  the  nucleus  of  the 
Capitalistic  System — owns  the  major  portion  of  the  na¬ 
tion’s  wealth.  Moreover,  it  practically  owns  and  certainly 
controls,  the  banks,  the  insurance  companies,  the  railroad 
and  transportation  systems,  the  public  utilities,  the  raw 
materials,  natural  resources  and  leading  industries.  By 
virtue  of  its  supreme  sovereignty  it  reaps  the  biggest  por¬ 
tion  of  the  profits  derived  from  the  employment  of  Capital 
and  Labor,  in  whatever  enterprises.  I  will  not  particularly 
emphasize  here  that  the  administration  of  our  Government 
is  in  a  large  measure  controlled,  and  its  policies  dictated, 
by  this  small  Capitalistic-Mammonistic  group;  however,  it 
is  even  so.  But  I  will  emphasize  that  the  destinies  of  thirty 
million  workers,  and  the  fate  of  sixteen  million  non-investor 
families,  is  entirely  in  the  hands  of  this  small  group. 

Legitimate  Capitalism 

Let  none  imagine  that  I  am  opposed  to  legitimate  Capi¬ 
talism  ;  I  am  not !  Capital  is  essential  to  progress,  to  life. 
Capital  is  the  prime  requisite  for  business.  Without  Capi¬ 
tal  the  wheels  of  production  cannot  function;  and  the  car 
of  commerce  cannot  move.  No  sane  man  can  have  any 
quarrel  with  legitimate  Capital,  nor  take  exception  to  any 
of  its  legitimate  functions,  nor  begrudge  it  a  fair  reward. 
But  when  Capital  ceases  its  legitimate  operations,  and 
transcends  the  respectable  limits  of  decency;  when  it  be¬ 
comes  a  name  for  greed  and  a  synonym  for  cupidity  and 
injustice;  when  the  whole  concern  of  those  who  employ 
it  is  the  quick  accumulation  of  riches  regardless  of  the 
methods  used,  regardless  of  the  means  employed,  no  mat¬ 
ter  whom  it  injures  or  whom  it  hurts,  then  it  reveals  itself  as 
the  monster  of  Capitalistic  Mammonism,  and  quite  natur¬ 
ally  we  may  expect  some  more  or  less  audible  protests  from 
its  victims.  The  Capitalism  of  which  I  speak  in  this  book 


Mane — Tekel — Upharsin 


235 


is  the  Mammonistic  variety.  Capitalism  with  the  rabies. 
It  is  Capitalistic  Mammonism,  not  Capitalism,  that  must 
be  destroyed. 

My  Argument  Summarized 

Let  it  be  understood  that  I  have  never,  and  do  not  now, 
advocate  what  is  sometimes  spoken  of  as  an  equal  division 
of  property,  or  of  wealth.  Against  both  of  these  proposals 
I  set  my  face.  I  uphold  the  principle  of  the  doctrine  of 
property  rights;  but  I  strongly  protest  against  the  concen¬ 
tration  of  all  the  productive,  profitable  properties  in  the 
hands  of  a  few.  I  will  at  all  times  defend  the  right  of  the 
individual  to  hold  property,  but  I  favor  an  economic  con¬ 
dition  under  which  the  right  to  have  and  to  hold  property 
will  be  enjoyed  by  a  greater  number. 

In  brief  I  summarize  my  argument  into  the  advocacy 
of  an  economic  system  under  which  those  who  work  for  a 
wage  will  participate  in  the  usufruct  of  their  labor,  and 
which  participation  automatically  gives  them  an  oppor¬ 
tunity  to  save  a  part  of  their  wages,  and  invest  same  in  the 
enterprises  which  their  labor  makes  possible,  and  their 
patronage  profitable.  If  simple  justice  is  extended  to  those 
who  labor  for  a  wage,  Mammonism  will  come  to  an  end, 
and  never  more  lift  its  ugly  monster  head  upon  the  earth. 

“The  Established  Order” 

There  are  those  who  speak  of  the  “established  Order” 
as  if  it  were  something  holy,  fashioned  by  the  hand  of  God 
Himself,  and  for  the  exclusive  benefit  of  a  few.  There  is 
no  such  thing  as  an  established  Order.  From  the  beginning 
of  the  world  the  “established”  Order  has  changed,  pro¬ 
gressively — generally  gradually,  but  sometimes  suddenly. 
Thus  the  Order,  that  can  be  said  to  have  been  the  estab¬ 
lished  Order  from  1850  to  1900,  came  to  an  abrupt  end  the 
day  the  United  States  Steel  Corporation  was  organized; 
and  by  that  act  a  new  Order  was  created  almost  over  night. 
But  this  new  Order, i  ‘  conceived  in  sin  and  brought  forth  in 


236 


The  New  Capitalism 


iniquity” — is  now  old  and  decrepit  and  disreputable.  Nay, 
it  has  ceased  to  be  Order  at  all ;  it  is  ‘ 1  the  established  Dis¬ 
order.  ”  But  whether  you  call  it  Order  or  Disorder,  it  is  no 
longer  acceptable  to  a  majority  of  the  people.  Surely  there 
is  none  so  bold  as  to  say  that  it  is  the  duty  of  the  people 
to  support  an  Order  under  wThich  all  the  wealth  and  all  the 
profits  flow  through  myriad  streams  into  the  coffers  of  a 
few  hundred  or  thousand  Capitalistic  Mammonists.  It  is 
not  the  duty  of  the  people  to  support  and  make  permanent 
an  Order  under  which  they  are  gradually  being  reduced  to 
economic  serfdom.  Nay,  it  is  their  duty  to  change  the 
Order  under  the  tyranny  of  which  they  are  slowly  being 
forced  into  a  condition  of  poverty  and  slavery. 

A  Bird’s  Eye  View 

If  any  one  doubts  the  sinister  design  of  the  Capitalistic 
Mammonists  to  reduce  the  wage  earners  of  the  nation  to 
servility  and  economic  serfdom,  let  him  consider  at  least 
a  few  of  the  things  they  have  imposed  upon  us: 

They  have  depreciated  the  wage  dollar — reduced  the  pur¬ 
chasing  power  of  money ; 

They  are  compelling  us  to  pay  approximately  four  dol¬ 
lars  for  what  formerly  cost  one  dollar ; 

They  have  given  us  the  High  Cost  of  Living ; 

They  have  compelled  us  to  lower  our  standard  of  living, 
• — doubling  our  rents,  and  prices  of  foods,  wearing  ap¬ 
parel,  etc.; 

They  have  succeeded  in  establishing  conditions  by  virtue 
of  which  the  income  of  an  average  family  will  be  insuffi¬ 
cient  to  live  in  decency  and  comfort ;  besides  compelling  an 
increasing  number  of  women  and  children  to  enter  the 
ranks  of  wage  earners; 

They  have  cut  wages  and  salaries  to  a  point  that  will 
make  it  well  nigh  impossible  for  a  wage  earner  to  lay  aside 
even  a  small  surplus  (savings)  ; 

Within  recent  years  they  have  put  millions  of  men  and 
women  to  the  necessity  of  consuming  what  little  surplus 


Mane — Tekel — Upharsin 


237 


they  may  have  managed  to  save,  by  dint  of  thrift  and  sac¬ 
rifice,  in  those  better  times  before  the  Capitalist  c-Mam- 
monistic  System  was  fully  developed. 

They  have  foisted  upon  us  a  system  of  from  hand  to 
mouth  existence ; 

Thanks  to  them  the  average  wage  earner — the  average 
family — is  constantly  a  week  or  month,  or  several  weeks 
or  several  months,  in  arrears ;  for  the  wages  or  salary  they 
receive  pay  not  for  what  they  are  going  to  consume,  but  for 
what  they  have  consumed — and  that  is  Pauperism  of  the 
direst  kind. 

But  why  lengthen  the  list  of  Capitalistic-Mammonistic 
achievements,  when  a  single  sentence  tells  the  story.  The 
Capitalistic  Mammonists  have  pressed  us  into  the  dust. 
Can  they  keep  us  there  ?  They  can !  unless  we  break  their 
stranglehold.  And  I  say  it  can  be  broken!  It  must  be 
broken !  It  will  be  broken ! 

A  Strong  Cup  of  Coffee 

Senator  Atlee  Pomerene,  in  an  address  before  the  Ohio 
State  Bankers  Association,  Cleveland,  Ohio,  discussed  the 
economic  problems  of  the  day.9 * 

He  concluded  by  saying  that  he  had  received  many  let¬ 
ters  from  his  constituents,  but  one  of  them,  he  said,  gave 
the  cause  of  the  disturbed  conditions  more  tersely  and  more 
forcefully  than  all  the  rest.  He  said  the  explanation  of 
present  conditions  is  “the  country  is  getting  over  a  big 
drunk. ”  “I  am  afraid, ’ ’  continued  Senator  Pomerene,  1 1  he 
told  the  truth.  Whether  we  are  of  the  employer  or  employee 
class,  whether  we  belong  to  the  idle  rich  or  to  those  who 
are  objects  of  charity,  let  us  all  take  a  strong  cup  of  coffee, 
sober  up  and  work  and  save.  It  will  clear  our  vision.  It 
will  help  solve  the  problems  that  confront  us.” 

With  all  due  respect  to  Senator  Pomerene,  who,  I  believe, 
is  a  well  intentioned  man — though  a  mighty  poor  economist 

9  See  Congressional  Record,  July  15,  1921,  p.  4007.  Needless  to 

say  Senator  Pomerene  discussed  his  subject  from  the  Capitalistic,  not 

from  the  non-investor’s  standpoint. 


238 


The  New  Capitalism 


— this  is  the  sort  of  economic  nonsense  one  encounters  fre¬ 
quently  in  these  days.  No !  the  country  is  not  just  ‘  ‘  getting 
over  a  big  drunk.”  The  country  has  been  on  a  bestial  de¬ 
bauch  for  more  than  twenty  years,  and  is  at  present  suffer¬ 
ing  from  the  consequences  of  its  vile  excesses  and  shameful 
immoralities  practiced  for  nearly  a  quarter  of  a  century. 
A  more  drastic  specific  than  a  “strong  cup  of  coffee”  is 
needed.  In  fact  there  is  no  cure  known  to  science  for  what 
ails  the  patient.  The  corruption  has  progressed  too  far ;  it 
has  reached  the  final  stage. 

Trouble  With  a  Cup  of  Coffee 

But  apropos  of  Senator  Pomerene’s  “strong  cup  of  cof¬ 
fee.”  I  wonder  whether  he  has  ever  read  that  amusing 
book  called  “The  Peterkin  Papers”!  I  read  it  when  I  was 
still  in  my  teens.  The  very  first  paper  is  entitled  ‘  ‘  Trouble 
with  a  Cup  of  Coffee.  ’  ’ 

Mrs.  Peterkin  had  just  prepared  a  cup  of  delicious  coffee, 
but  absent-mindedly  had  put  salt  into  it  instead  of  sugar. 
She  called  her  family  together  and  explained  the  difficulty, 
and  asked  their  advice.  Agamemnon,  just  home  from 
college,  suggested  that  they  call  in  the  chemist,  a  most 
learned  man.  They  go  to  him  and  state  their  errand,  prom¬ 
ising  to  pay  him  in  gold.  He  agrees  to  go  with  them.  Into 
the  cup  of  coffee  the  chemist  puts  a  half  hundred  different 
kinds  of  chemicals.  Still  the  coffee  is  not  fit  to  drink.  They 
pay  him  for  his  trouble,  and  he  departs. 

Again  the  disturbed  Peterkins  hold  council,  and  they 
decide  to  call  in  the  herb-woman.  She  agrees  to  try  her 
skill.  Into  the  spoiled  cup  of  coffee  she  puts  tansy,  penny¬ 
royal,  caraway  seed,  spearmint,  cloves,  sweet  marjoram, 
basil  and  rosemary,  wild  thyme,  catnip,  valerian  and  hops. 
But  still  the  coffee  wasn ’t  fit  to  drink.  She  decides  that  it ’s 
bewitched,  and  goes  home. 

In  desperation  the  Peterkins  decide  to  ask  the  Lady  from 
Philadelphia,  a  most  wise  woman.  She  suggests  that  they 


Mane — Tekel — Upharsin 


239 


throw  out  the  cup  of  doctored  coffee  and  make  a  fresh  one. 
Delighted,  they  decide  to  do  so. 

And  the  moral  of  this  tale  is  that  salt  and  chemicals  and 
herbs  have  been  stirred,  for  nearly  a  quarter  of  a  century, 
into  the  economic  coffee — myrrh — which  we  are  supposed 
to  drink — not  absent-mindedly  but  deliberately  and  with 
malice  aforethought,  by  Capitalistic  cooks  with  evil  designs 
upon  our  economic  health  and  social  well-being.  We  mean 
to  throw  out  the  cup  of  coffee  with  salt,  and  chemicals  and 
herbs  in  it,  and  henceforth  do  our  own  brewing,  according 
to  our  own  formula. 

Scrambled  Eggs 

Since  Senator  Pomerene ’s  homely  remedy  has  brought  us 
into  the  vicinity  of  the  kitchen.  I  recall  a  pertinent  question 
asked  by  the  most  illustrious  of  all  Capital]  stic-Mammonis- 
tic  chefs ,  J.  Pierpont  Morgan,  a  few  years  before  his  death. 
He  admitted  that  things  were  pretty  badly  mixed  up,  but 
complacently  dismissed  the  whole  subject  with  the  query: 
‘  ‘  Can  you  unscramble  eggs  ?  ’  ’ 

No !  we  can ’t  unscramble  eggs,  but  we  can  fire  the  cook 
whose  sole  culinary  ability  consists  in  scrambling  eggs.  The 
country  is  sick  of  the  continuous,  exclusive  and  excessive 
diet  of  scrambled  eggs  that  has  been  forced  down  its  un¬ 
willing  throat  into  its  rebellious  stomach.  Nor  is  the  situa¬ 
tion  improved  by  the  discovery  that  the  scrambled  eggs 
with  which  the  country  has  been  fed  for  the  last  quarter 
of  a  century,  were  rotten  eggs. 

The  terrible  grip  of  Mammonistic  Capitalism  must  be 
broken.  Carthago  est  delenda,  cried  Cato;  and  Carthage 
was  destroyed.  The  god  Mammon  must  be  dethroned; 
Moloch  must  be  toppled  over. 

“Impossible!” 

“Impossible!”  a  hundred  thousand,  perhaps  a  million, 
or  several  million,  voices  will  cry  in  unison.  But  read  the 


240 


The  New  Capitalism 


following  from  Carlyle’s  essay  on  “Chartism,”  from  the 
chapter  entitled  ‘  ‘  Impossible !  ’  ’ 

‘  ‘  ‘  But  what  are  we  to  do  ?  ’  ”  exclaims  the  practical  man, 
impatiently  on  every  side :  “  ‘  Descend  from  speculation  and 
the  safe  pulpit,  down  into  the  rough  market-place,  and  say 
what  can  be  done!’  ” — 0,  practical  man,  there  seem  very 
many  things  which  practice  and  true  manlike  effort,  in  Par¬ 
liament  and  out  of  it,  might  actually  avail  to  do.  But  the 
first  of  all  things,  as  already  said,  is  to  gird  thyself  up  for 
actual  doing ;  to  know  that  thou  actually  either  must  do,  or, 
as  the  Irish  say,  “come  out  of  that.” 

“It  is  not  a  lucky  word,  this  same  impossible;  no  good 
comes  of  those  that  have  it  so  often  in  their  mouth.  Who 
is  he  that  says  always,  There  is  a  lion  in  the  way ?  Slug¬ 
gard,  thou  must  slay  the  lion,  then;  the  way  has  to  be 
travelled !  .  .  . 

“It  was  proved  by  fluxionary  calculus,  that  steamships 
could  never  get  across  from  the  farthest  point  of  Ireland 
to  the  nearest  of  Newfoundland;  impelling  force,  resisting 
force,  maximum  here,  minimum  there;  by  law  of  Nature, 
and  geometric  demonstration : — what  could  be  done  ?  The 
Great  Western  could  weigh  anchor  from  Bristol  Port;  that 
could  be  done.  The  Great  Western,  bounding  safe  through 
the  gullets  of  the  Hudson,  threw  her  cable  out  on  the  cap¬ 
stan  of  New  York,  and  left  our  still  moist  paper-demonstra¬ 
tion  to  dry  itself  at  leisure.  ‘Impossible ! ’  cried  Mirabeau  to 
hi s  secretary.  ‘ Ne  me  dites  jamais  ce  bete  de  mot,  N$ vtt 
xame  to  me  that  blockhead  of  a  word !  ’ 

“To  the  practical  man,  therefore,  we  will  repeat  that  he 
kas,  as  the  first  thing  he  can  ‘do,’  to  gird  himself  up  for 
actual  doing;  to  know  well  that  he  is  either  there  to  do,  or 
not  there  at  all.  Once  rightly  girded  up,  how  many  things 
will  present  themselves  as  doable  which  now  are  not  at- 
temptable !  ’  ’10 


10  “Chartism/'  by  Thomas  Carlyle,  Chapter  X. 


241 


Mane — Tekel — Upharsin 
The  Servile  State 

Hilaire  Belloc,  in  his  most  interesting  book,  ‘  ‘  The  Servile 
State,  ”  graphically  describes  how  by  the  middle  of  the 
seventeenth  century  a  dominant  few  had  established  them¬ 
selves  as  the  overlords  of  creation.  He  speaks  of  it  as  “the 
new  wealth” — “with  all  the  realities  of  power  in  the  hands 
of  a  small,  powerful  class  of  wealthy  men,  the  King  still 
surrounded  by  the  fancies  and  traditions  of  his  old  power, 
but  in  practice  a  salaried  puppet.  And  in  that  social  world 
which  underlies  all  political  appearances,  the  great  domi¬ 
nating  note  was  that  a  few  wealthy  families  had  got  hold 
of  the  bulk  of  the  means  of  production  in  England,  while 
the  same  families  exercised  all  local  administrative  power 
and  were,  moreover,  the  Judges,  the  High  Executives,  the 
Church  and  the  generals.  They  quite  overshadowed  what 
was  left  of  central  government  in  this  country. J  9 

“By  1700,”  continues  Mr.  Belloc,  “half  of  the  English 
were  dispossessed  of  capital  and  land.  Not  one  man  in  two, 
even  if  you  reckon  the  very  small  owners,  inhabited  a  home 
of  which  he  was  the  secure  possessor,  or  tilled  land  from 
which  he  could  not  be  turned  off.  .  .  .  England  had 

already  become  Capitalistic.  She  had  already  permitted 
a  vast  section  of  her  population  to  become  proletarian ,  and 
it  is  this,  and  not  the  so-called  “Industrial  Revolution,”  a 
later  thing,  which  accounts  for  the  terrible  social  condi¬ 
tion  in  which  we  find  ourselves  today.  .  .  . 

“In  an  England  thus  already  cursed  with  a  very  large 
proletariat  class,  and  in  an  England  already  directed  by  a 
dominating  Capitalist  class,  possessing  the  means  of  pro¬ 
duction,  there  came  a  great  industrial  development. 

“Had  that  industrial  development  come  upon  a  people 
economically  free,  it  would  have  taken  a  cooperative  form. 
Coming  as  it  did  upon  a  people  which  had  already  lost  its 
economic  freedom,  it  took  at  its  very  origin  a  Capitalistic 
form,  and  this  form  it  has  retained,  expanded,  and  per¬ 
fected  throughout  two  hundred  years. 


242 


The  New  Capitalism 


“It  was  in  England  that  the  Industrial  System  arose. 
It  was  in  England  that  all  its  traditions  and  habits  were 
formed;  and  because  the  England  in  which  it  arose  was 
already  a  Capitalistic  England,  modern  Industrialism, 
wherever  you  see  it  at  work  today,  having  spread  from 
England,  has  proceeded  upon  the  Capitalistic  model.  ’  ’  Etc. 

The  Challenge  to  Mammonistic  Capitalism 

Mr.  Belloc’s  book  from  which  I  quoted  the  foregoing, 
contains  many  other  passages  which  wrould  throwT  consid¬ 
erable  light  on  our  own  economic  affairs.  But  we  must  con¬ 
tent  ourselves  for  the  present  to  merely  emphasize  what 
he  so  admirably  discloses,  that  the  desperate  economic  con¬ 
dition  of  the  world,  including,  of  course,  the  United  States, 
can  be  directly  traced  to  the  dominant  ascendancy  and 
supreme  sovereignty  of  Mammonistic  Capitalism  which 
began  its  operations  several  centuries  ago,  and  has  con¬ 
tinued  its  deadly  work  with  almost  scientific  fiendishness 
until  today  the  whole  world  is,  economically  speaking,  being 
throttled  to  death. 

The  immediate  question  that  presses  for  an  immediate 
answer  in  the  United  States  (as  well  as  elsewhere),  is:  Shall 
Mammonistic  Capitalism  be  permitted  to  tighten  its 
stranglehold  upon  the  throats  of  the  people — upon  the 
throats  of  those  who  -work  for  a  wage — who  constitute  the 
non-investor  group;  or  shall  it  be  compelled  to  release  its 
throttling  death  grip? 

To  merely  content  ourselves  with  giving  a  stentorian 
answer  is  not  enough.  Valiant  action  must  accompany  our 
words.  Great  deeds  must  be  performed,  such  as  will  bring 
the  Capitalistic-Mammonistic  group  to  its  senses,  if  not  to 
its  knees;  and  the  non-investors — those  who  work  for  a 
wage  or  salary,  or  the  equivalent,  into  their  rightful  heri¬ 
tage. 

To  point  THE  WAY  is  the  purpose  of  the  Second  Part  of 
this  book. 


PART  II 

THE  NEW  ORDER 


This  world ,  ’ tis  true,  was  made  for  Caesar, 
But  for  Brutus,  too . 


CHAPTER  XIX 
“ Where  There’s  a  Will 


?  J 

WHEN  one  begins  to  look  under  the  surface  of  the 
Capitalistic  Entrepreneur  System — a  System  which 
takes  into  consideration  only  the  welfare  of  a  com¬ 
paratively  small  group  of  individuals,  and  entirely  ignores 
the  interests  of  the  non-investor  portion  of  the  pub¬ 
lic,  one  wonders  why  the  eighty  million  non-investors 
have  never  made  any  serious  attempt  to  organize  for 
their  own  protection.  I  do  not  mean  in  a  social  or  political 
way;  (the  one  is  impossible;  the  other  unnecessary  and 
undesirable,  at  least  for  the  present)  I  mean  in  a  purely 
economic  way;  I  mean  to  protect  themselves  and  their 
families  from  further  exploitation,  and  save  themselves 
from  the  permanent  poverty  into  which  they  are  slowly,  but 
none  the  less  surely,  drifting.  If  ever  there  was  a  reason 
for  the  non-investor  group  to  seriously  consider  such  a  step, 
that  reason  exists  today  as  never  before.  If  ever  the  neces¬ 
sity  for  self-protection  existed,  it  is  urgent  today.  What 
the  non-investors  have  lacked  to  date  is  leadership,  and  a 
rational,  workable  program.  No  one  has  ever  showed  them 
the  way,  nor  pointed  out  how  their  economic  freedom  might 
be  won.  The  purpose  of  this  book  is  to  show  them  the  way ; 
let  us  hope  that  the  leaders  will  arise  among  them  in  dwe 
time. 

The  fundamental  weakness  of  all  economic  remedies  thus 
far  proposed,  is  that  they  call  for  group  action  and  strive 
only  for  group  benefits;  whereas  what  the  world  needs 
today  is  a  program  that  calls  for  mass  action,  the  net 
result  of  which  will  yield  mass  benefits.  There  are  eighty 
million  men  and  women  who  constitute  the  non-investor 
group.  Of  this  number  approximately  thirty  million  are 


« 


245 


246 


The  New  Capitalism 


engaged  in  gainful  occupations,  that  is,  working  for  a  wage 
or  salary,  or  for  a  recompense  the  equivalent  of  a  wage  or 
salary.  These  thirty  million  men  and  women  workers  (Oh, 
yes,  there  are  children  included  in  the  number,  millions  of 
them,  more ’s  the  pity  and  greater  the  shame — children  who 
ought  to  be  in  school),  represent  a  tremendous  power — a 
power  that  is  now  going  to  waste  because  unorganized.  I 
call  upon  them  to  constitute  themselves  into  a  unified  group. 
I  exhort  them  to  combine  their  scattered  strength  into  a 
formidable  power.  I  urge  them  to  organize  themselves  into 
an  economic  unit,  which  for  the  purpose  of  this  book  I 
shall  call  THE  NEW  ORDER. 

The  Will  to  Do 

Have  they  the  will  to  do  it?  That  is  where  the  people 
are  weak.  Generations  of  buffeting  have  weakened  their 
wills,  and  created  a  state  of  mind  that  has  robbed  them  of 
all  initiative — and  even  of  the  courage  to  try.  Keeping 
their  nose  to  the  grindstone  has  dulled  their  vision  and 
ruined  whatever  of  keen  far-sightedness  they  may  once 
have  possessed.  The  vital  energies  of  their  natures  have 
been  drained  by  the  struggle  for  existence.  So  long  have 
they  stood  in  open-mouthed  wonder  at  the  supposed  omnipo¬ 
tence  of  the  organized  few  that  they  have  lost  all  conscious¬ 
ness  of  their  own  strength.  Compelled  to  wrestle  with  the 
little,  vexatious  problems  of  their  daily  lives,  they  have  not 
dared  to  dream,  much  less  venture  to  attempt  the  solution, 
of  the  one  supreme  problem — their  economic  independence 
and  their  social  well  being.  Driven,  and  accustomed  to 
being  driven,  they  have  never  allowed  themselves  to  think 
of  ever  being  Masters  of  their  own  lives,  Masters  of  their 
own  fortunes,  Masters  of  their  own  destinies ; — Captains  of 
their  own  finances,  Captains  of  their  own  industry,  Cap¬ 
tains  of  their  own  souls. 

“A  House  Divided  Against  Itself” 

I  have  said  that  we  have  no  caste  system  in  the  United 
States;  but  we  have  something  that  is  unspeakably  worse. 


“Where  There’s  a  Will” 


247 


There  is  no  homogeneity  among  us.  We  are  split  into 
warring  camps  and  quarreling  groups,  opposing  parties 
and  fighting  factions,  along  political,  social,  racial,  religious 
and  economic  lines.  There  is  not  a  single  question  on  which 
we  are  united ;  not  a  single  issue  on  which  we  present  a  solid 
front.  And  when  I  speak  of  we  I  mean  particularly  the 
eighty  percent  composed  of  wage  earners,  and  salaried  men 
and  women,  constituting  the  non-investor  group.  Indeed 
if  my  plan  contemplated  organizing  a  national  association 
of  the  eighty  million  non-investor  population  now  scat¬ 
tered  and  disorganized  throughout  the  forty-eight  states,  I 
would  despair,  or  at  least  be  tempted  to  set  it  down  as  an 
unaccomplish  able  plan.  But  the  thing  that  makes  such  an 
association  not  only  possible  but  already  a  partially  accom¬ 
plished  fact,  is  the  actual  existence  of  the  nucleus  of  the 
New  Order,  the  one  power  which  thus  far  has  saved  us  from 
sconomic  serfdom  and  through  which  alone  society  can  be 
re-created.  The  machinery  through  which  a  struggling 
humanity  can  redeem  itself  is  in  running  order. 

Organized  Labor — the  Niocleas  of  the  New  Order 

It  is  not  accurate  to  say  that  the  eighty  million  non¬ 
investors  are  entirely  unorganized.  A  part  of  the  non-in¬ 
vestor  group  is  organized.  I  refer  to  that  portion  of  the 
eighty  million  known  as  organized  Labor,  or  wage  earners 
— not  all  of  the  wage  earners  but  a  considerable  number. 
According  to  the  statistics  there  are  in  the  United  States 
approximately  thirty  million  wage  earners  and  salaried  men 
and  women.  Of  these  it  is  reported  that  six  or  seven  mil¬ 
lion  are  more  or  less  thoroughly  organized.  The  most  pow¬ 
erful  Labor  organization,  and  the  one  having  the  largest 
membership,  is  the  American  Federation  of  Labor,  to  which 
about  four  million  of  wage  earners  belong.  Then  there  are 
independent  Labor  organizations,  brotherhoods,  or  unions, 
and  amalgamations  of  workers  in  specified  industries.  All 
told  the  total  membership  in  Labor  organizations  is  approxi¬ 
mately  seven  and  a  half  million.  In  other  words,  about 
one-fourth  of  the  wage  earners  are  organized.  It  matters 


248 


The  New  Capitalism 


little  as  to  their  precise  number;  the  stress  is  to  be  laid 
entirely  on  the  fact  that  they  are  organized,  imperfectly, 
and  not  ideally,  perhaps,  but  organized,  therefore  the 
nucleus  of  a  greater  organization.  ‘  ‘  Aye,  there ’s  the  nib !  ’ 1 
Even  though  organized  Labor  numbered  only  a  million 
members  I  would  still  say  that  the  nucleus  of  the  New  Order 
is  in  existence  today,  and  able  to  carry  out  all  the  plans  I 
have  in  mind  with  regard  to  the  NEW  CAPITALISM. 

Around  this  nucleus,  it  is  reasonable  to  suppose  that, 
while  it  will  not  be  easy  in  the  beginning,  yet  with  per¬ 
sistent  effort  it  will  be  possible  to  gather  the  active  support 
and  cooperation  of  a  fair  percentage  of  men  and  women 
engaged  in  gainful  occupations  who  do  not  belong  to  any 
Labor  organization,  and  who  have  no  affiliation  whatever 
with  organized  Labor;  for,  let  me  make  myself  entirely 
clear — the  New  Order  is  not  to  be  composed  exclusively  of 
those  who  are  members  of  Labor  organizations,  but  is  to 
include  anyone  desirous  of  lending  a  helping  hand  in  the 
work  of  improving  economic  conditions — of  making  people 
happier,  the  world  a  better  place  to  live  in,  and  life  more 
enjoyable.  No  one  will  be  barred,  whatever  his  rank  or 
station  in  life  may  be.  Wage  earner  and  salaried  person; 
property  owner  or  tenant;  lawyer,  physician,  druggist, 
dentist,  farmer,  shop-keeper,  or  to  whatever  occupational 
group  each  may  belong,  is  eligible  to  membership. 

A  Call  to  Organized  Labor 

But  while  I  have  in  mind  the  organization  of  the  non- 
investor  portion  of  the  population,  eighty  million  men  and 
women — sixteen  million  families — I  realize  that  such  an 
•rganization  is  well  nigh  impossible  save  through  the  agency 
of  organized  Labor.  Organized  Labor  is  to  be  the  nucleus 
Of  the  greater  organization  that  will  shape  itself  by  degrees 
and  in  due  time.  Organized  Labor  has  the  power,  if  it  will 
but  effectively  and  intelligently  use  it,  to  break  the  back¬ 
bone  of  the  Capitalistic  Entrepreneur  System.  The  Capital¬ 
istic  Entrepreneur  group  is  not  afraid  of  Labor  as  at  pres¬ 
ent  organized,  or  rather  disorganized;  it  does  not  stand  in 


“ Where  There’s  a  Will” 


249 


dread  of  its  power.  Indeed  the  Capitalistic  Entrepreneur 
group  has  rather  successfully  undermined  Labor’s  might. 
It  has  divided  those  who  labor  into  opposing  camps ;  it  has 
corrupted  individuals  and  disrupted  groups;  and  at  this 
very  moment,  is  engaged  in  dealing  death  blows  to  all  organ¬ 
ized  Labor.  Organized  Labor  should  need  no  call  from  me 
to  save  itself.  For  its  own  sake,  then,  I  cry  out  to  organ¬ 
ized  Labor,  or  what  is  left  of  it — save  yourselves — and  save 
the  nation.  Your  death  means  the  nation’s  death!  Rouse 
yourselves.  Act  today ;  tomorrow  it  may  be  too  late. 

I  do  not  know  whether  organized  Labor  or  any  organized 
Labor  groups  will  heed  my  cry  or  act  upon  my  suggestion, 
but  at  any  rate  I  shall  indulge  in  that  assumption  in  this 
chapter.  I  will  delude  myself  into  the  belief  that  at  least 
five  million  wage  earners  are  willing  to  make  an  effort  to 
win  economic  freedom  for  themselves,  their  families,  and  all 
those  not  an  integral  part  of  the  Capitalistic  Entrepreneur 
System — for  the  sixteen  million  non-investor  families. 

The  organization  of  five  million  wage  earners  into  one 
compact  body  is  the  first  step.  For  the  purpose  of  this 
book,  and  so  as  to  make  myself  plain,  and  more  easily  under¬ 
stood,  I  am  going  to  imagine  the  actual  existence  of  the  New 
Order,  with  a  membership  of  five  million  members,  drawn 
entirely  from  the  ranks  of  organized  Labor.  For  truth  to 
tell,  unless  organized  Labor  sees  the  wisdom,  or  the  possi¬ 
bilities,  of  my  plan,  and  decides  to  take  a  hand,  there  is 
little  hope  for  the  non-investors.  Things  will  go  on  as  they 
are,  nay,  go  from  bad  to  worse,  until  the  final  crash  comes. 

Very  well,  then!  Here  we  are,  five  million  strong — all 
wage  earners — organized,  consolidated  and  co-ordinated 
under  the  New  Order.  What  is  our  program?  What  steps 
will  we  take;  how  will  we  proceed? 

The  Sustaining  Props  of  Capitalistic  Supremacy 

In  the  first  part  of  my  book  I  have  endeavored  to  show 
the  dominant  position  of  the  Capitalistic  Entrepreneurs; 
and  the  tyranny  of  the  Capitalistic  Entrepreneur  System. 
I  do  not  consider  it  necessary  to  summarize  all  the  points  I 


250 


The  New  Capitalism 


have  scored  against  the  Capitalistic  Entrepreneur  group 
and  System,  preferring  to  believe  that  at  least  some  of  the 
things  I  have  written  have  made  an  impression  and  are  still 
remembered  by  the  readers.  It  will  suffice  to  remind  the 
readers  that  the  Capitalistic  Entrepreneur  group  is  com¬ 
posed  of  a  small  number;  I  care  not  whether  you  make  it 
four  hundred,  or  four  thousand,  or  four  hundred  thousand, 
or  four  million.  This  compact,  powerful  group  owns  and 
controls  practically  all  the  “ wealth’ ’  producing  properties 
in  the  United  States.  Not  content  with  that  it  has, 
through  the  device  of  overcapitalization,  inflated  the  na¬ 
tional  wealth  by  one  hundred  billion ;  against  which  it  has 
issued  immense  quantities  of  “ securities.’ ’  On  the  inflated 
wealth,  the  people  are  compelled  to  pay  taxes,  rents,  divi¬ 
dends  and  interest.  Moreover  the  giant  Capitalistic  Entre¬ 
preneurs  have  a  monopoly  of  the  nation’s  finances,  con¬ 
trolling  absolutely,  money  and  credits  through  their  system 
of  banks.  They  have  moreover  a  monopoly  of  all  natural 
resources,  raw  materials  and  the  leading  industries,  trans¬ 
portation  systems,  public  utilities,  etc. 

All  these  monopolies  and  controls  are  made  possible  to 
the  Capitalistic  group  first  by  its  control  of  Capital;  and 
second  by  its  control  of  Labor.  If  this  double  control  can 
be  broken  the  Capitalistic  Entrepreneur  System  will  col¬ 
lapse  and  sink  into  the  mire  of  its  own  rottenness ;  and  the 
people — the  wage  earners,  the  non-investors — will  come  into 
their  own. 


The  Basic  Capital  Fund 

In  the  light  of  all  I  have  said  let  me  ask :  How  did  the 
Capitalistic  Entrepreneurs  build  up  their  power?  By  the 
autocratic  use  of  capital  and  credit.  Whose  capital?  Our 
capital,  for,  the  Basic  Capital  Fund  of  the  nation  is  the 
property  of  the  eleven  million  savings  depositors,  most  of 
them,  it  will  be  admitted,  belonging  to  the  non-investor' 
group.  Indeed  it  may  be  well  to  remind  the  readers  that 
these  eleven  million  savings  depositors  have  on  deposit  an 


“Where  There’s  a  Will” 


251 


amount  greater  than  the  amount  of  money  in  circulation. 
On  July  1,  1920,  the  total  amount  of  money  in  circulation 
was  $6,087,555,007 ;  on  the  same  date  the  11,427,555  savings 
depositors  had  a  total  of  $6,536,596,000  in  the  savings  banks 
of  the  United  States —  in  other  words,  a  half  billion  dollars 
more  than  money  in  circulation. 

The  savings  of  the  eleven  million  savings  depositors  con¬ 
stitute  the  nation’s  working  capital.  More  accurately 
speaking,  the  eleven  million  savings  depositors  have  placed 
their  aggregate  savings  into  the  hands  of  the  Capitalistic 
Entrepreneur  group,  which  this  group  is  using  over  and 
over  in  its  various  enterprises — monopolizing  materials  and 
industries,  controlling  markets,  fixing  prices — in  brief, 
strengthening  and  enlarging  the  power  of  the  Capitalistic 
System. 

Savings  Bank  Philosophy 

The  savings  depositors  receive  three,  or  let  us  liberally  say 
four  percent  per  annum  for  their  savings.  The  average 
amount  of  savings  per  depositor  is,  let  us  say  $500.  Con¬ 
sequently  the  average  savings  depositor  receives  as  a  reward 
for  leaving  his  money  on  deposit  in  Capitalistic  banks  for 
twelve  months,  $20.00.  Oh,  does  he?  Not  much !  for,  every 
dollar  he  leaves  on  deposit  is  used  in  the  aggregate,  by  an 
average  of  five  different  individuals  or  corporations,  each 
paying  an  average  rate  of  let  us  say,  five  percent,  to  the 
bank  for  its  use.  Every  person  or  corporation  using  this 
money  and  paying  interest  thereon,  charges  it  up  to  cost 
of  production — that  is,  adds  it  to  the  price  of  the  commodi¬ 
ties  produced —  and  the  total  amount  of  interest  is  collected 
from  those  who  purchase  the  commodities.  The  savings 
depositor  receives  $20.00  a  year  as  interest  on  his  sav¬ 
ings;  in  reality  he  is  penalized  three  or  four  times  the 
amount  he  receives  as  interest,  by  those  who  use  his  money. 

There  is  something  tragically  funny  about  the  fact  that 
the  savings  of  the  wTage  earners,  are  the  basic  working 
capital  of  the  Capitalistic  Entrepreneur  group  and  the  bul¬ 
wark  of  the  Capitalistic  System.  It  is  by  the  astute  and 


252 


The  New  Capitalism 


unscrupulous  use  of  the  savings  of  eleven  million  non¬ 
investors  of  the  working  group  that  a  comparatively  small 
group  of  men  have  been  enabled  to  take  possession  of  prac¬ 
tically  all  the  properties  in  the  United  States,  making  xabu- 
lous  profits ;  increasing  their  wealth  enormously,  and  build¬ 
ing  up  vast  fortunes.  It  would  be  amusing,  were  it  not  so 
tragic,  to  reflect  that  the  Capitalistic  group  is  at  this  very 
moment  using  the  savings  of  the  eleven  million  non-investor 
depositors  to  reduce  them  to  a  condition  of  abject  servility, 
permanent  poverty,  and  hopeless  dependence. 

Capital  Needs  the  Worker’s  Savings 

Labor  is  dependent  upon  Capital,  scream  the  economists; 
but  I  say  that  Capital  is  dependent  not  only  upon  Labor, 
but  upon  the  very  savings  of  the  wage  earners.  It  is  easy 
to  see  that  if  the  eleven  and  a  half  million  savings  deposi¬ 
tors  each  kept  his  or  her  money  (which,  you  will  admit,  is 
their  undisputed  right)  in  a  sock  instead  of  depositing  it 
in  the  savings  banks  (which  banks  are  a  vital  part  of  the 
Capitalistic  Entrepreneur  System)  the  country,  to  say  the 
least,  would  be  in  a  quandary.  Plainly  speaking,  it  cannot 
be  denied  that  the  savings  of  the  eleven  and  a  half  million 
depositors  (mostly  non-investors)  are  not  only  the  nation’s 
basic  working  capital  fund,  but  the  nation’s  credit  and  com¬ 
mercial  system  is  entirely  based  upon  its  constant  circu¬ 
lation. 

In  his  book,  “Highways  of  Progress,”1  James  J.  Hill 
says : 

*  ‘  Of  the  nearly  $4,000,000,000  of  deposits  in  the  savings 
banks  of  this  country,  the  bulk  consists  of  the  savings  of 
labor;  and  this  represents  but  a  portion  of  its  accumula¬ 
tions.  With  such  resources,  the  workingmen  of  the  coun¬ 
try  might,  if  they  chose,  practically  control  a  large  part  of 
its  industry  within  a  few  years.  From  every  point  of  view, 
the  workingman,  representing  the  greatest  number  whose 


i  Published  1912,  Doubleday  Page  &  Co. 


41 ‘Where  There’s  a  Will” 


253 


good  a  sound  industrial  order  must  seek,  appears  to  be  in 
the  world  of  wealth  production.  ’  ’ 

If  Labor  is  dependent  upon  Capital,  I’ll  say  that  the 
Basic  Capital  Fund  belongs  to  Labor,  and  it  is  only  neces¬ 
sary  for  Labor  to  learn  how  to  use  this  basic  fund  for  its 
own  and  all  the  people’s  benefit. 

Ye  eleven  million  depositors  in  savings  banks — arouse 
yourselves!  Ye  unorganized  non-investors — pinch  your- 

f 

selves!  Ye  are  asleep.  Ye  do  not  know  what  is  being  done; 
ye  are  unconscious  of  the  plan  that  is  being  put  into  execu¬ 
tion  this  very  moment.  Yours  are  still  the  six  billion  dollars 
basic  capital;  they  will  not  be  yours  ten  or  twenty  years 
hence  if  you  do  not  bestir  yourselves,  for  through  a  less 
wage  and  a  greater  increase  in  the  cost  of  commodities  you 
will  be  compelled  gradually  to  withdraw  your  savings 
merely  to  meet  your  current  living  expenses.  I  beseech  you, 
do  not  let  the  Capitalistic  group  transfer  the  six  billion 
dollars  now  deposited  to  your  credit,  to  its  credit,  via  the 
medium  of  lower  wages  and  higher  living  expenses.  I  have 
no  hesitancy  in  saying  that  the  conspiracy  is  on  to  bring  this 
■condition  about.  If  the  Capitalistic  group  can  succeed  in 
its  iniquitous  design  your  last  vestige  of  hope  will  be  gone. 

The  Wage  Earners  Can  Control  Capital 

Now  what  we  propose  to  do  is  gradually  to  take  control 
of  this  Basic  Capital  Fund  (indisputably  the  property  of 
non-investors)  away  from  the  small  group  of  Capitalistic 
Entrepreneurs  and  place  it  under  control  of  the  New  Order. 
We  do  not  intend  to  disturb  the  existing  funds.  We  will, 
for  the  present,  leave  them  where  they  are.  But  all  new 
savings,  from  now  on,  will  be  placed  into  a  Central  Treas¬ 
ury,  or  designated  banks  organized  by  the  New  Order,  and 
whose  officers  will  be  authorized  henceforth  to  confine  the 
employment  of  our  savings  solely  for  the  best  interests  of 
the  wage  earners  and  the  public,  and  not,  as  at  present, 
permit  them  to  be  used  by  and  for  the  sole  benefit  of  the 
Capitalistic  Entrepreneurs. 


254 


The  New  Capitalism 


Do  not  get  impatient!  I  haven’t  begun  to  open  the 
door ;  I  haven ’t  even  put  the  key  in  the  lock.  The  splendors 
concealed  within  the  palace  will  be  fully  revealed  to  you 
in  due  time !  I  am  striving  to  make  my  plan  perfectly  clear 
to  every  man  and  woman  of  even  ordinary  intelligence. 
That  is  why  I  am  throwing  rhetoric  to  the  winds,  and 
language  out  of  the  window.  I  am  not  attempting  to  write 
a  literary  masterpiece.  I  have  a  message  for  the  people, 
not  only  for  the  eighty  percent  of  our  population  but  for 
everyone  who  cares  to  read.  If  occasionally  I  falter  in  the 
delivery  it  is  because  I  realize  that  my  audience  is  not 
accustomed  to  me,  and  perhaps  incredulous,  and  some  even 
suspicious.  If  I  digress  once  in  a  while  it  is  to  give  them 
time  to  think  over  something  I  have  just  said.  If  I  hesi¬ 
tate  a  moment  it  is  not  for  lack  of  something  to  say,  but 
because  I  do  not  want  to  overwhelm  them  with  my  own 
enthusiasm. 

Creating  a  Capital  Fund  Under  the  New 

Capitalism 

Capital  is  the  prime  requisite  for  any  undertaking — it  is 
the  sine  qua  non  for  whatever  plans  we  may  have  in  mind. 
The  creation  of  Capital  funds,  therefore,  is  the  first  and 
most  important  concern  of  the  New  Order  In  brief,  if  five 
million  persons  (members  of  the  New  Order — and  at  the 
same  time  members  of  organized  Labor)  were  to  agree  to 
pay  into  a  certain  bank,  or  banks,  which  they  entirely  con¬ 
trol — or  shall  I  say  for  the  present — into  a  Central  Treas¬ 
ury,  five  dollars  a  month,  for  a  period  of  three  years,  none 
of  which  is  to  be  used  for  other  purposes  than  may  be 
designated  by  the  Supreme  officials  of  the  New  Order,  it  is 
easy  to  see  that  this  would  give  us  a  Basic  Capital  Fund 
of  $300,000,000  the  first  year;  $600,000,000  at  the  end  of 
the  second  year ;  and  in  three  years  $900,000,000 — an 
amount  which  I  deem  sufficient  to  completely  break  not 
only  the  Capitalistic  Entrepreneur  stranglehold,  but  the 
backbone  of  the  Capitalistic  Entrepreneur  System  of  tyr- 


“Where  There’s  a  Will” 


255 


anny  and  oppression.  In  ten  years,  by  this  simple  method, 
three  billion  dollars  would  be  raised. 

But  I  am  getting  ahead  of  my  story.  Let  me  put  it  this 
way: 

Each  of  the  five  million  wage  earners  is  to  pledge  him¬ 
self  to  pay  into  a  Central  Treasury  a  total  of  $180  within 
three  years ;  or  $60  a  year  at  the  rate  of  $5  a  month.  This 
is  about  seventeen  cents  a  day.  The  Signers  of  the  Declara¬ 
tion  of  Independence  pledged  their  lives,  their  fortunes, 
and  their  sacred  honor  to  win  political  independence  for 
the  nation.  It  remains  to  be  seen  whether  five  million  wage 
earners  can  be  found  who  are  willing  to  pledge  themselves 
to  pay  seventeen  cents  a  day  for  a  period  of  three  years, 
to  win  economic  independence  for  themselves,  their  families, 
and  all  the  people  of  the  nation.  The  United  States  Gov¬ 
ernment,  or  rather  the  people,  spent  about  four  billion 
dollars  to  emancipate  a  few  million  negro  slaves.  It  re¬ 
mains  to  be  seen  whether  five  million  wage  earners  can  be 
found  who  are  willing  to  invest  $60  a  year  for  a  period  of 
three  years  to  emancipate  themselves,  their  families,  and 
the  whole  nation  from  a  more  galling  yoke  of  economic 
slavery. 

Can  it  be  Bone  V 

It  goes  without  saying  that  the  Capitalistic  Entrepreneur 
group  will  wisely  shake  its  head  in  unison,  and  smile  while 
saying:  “It  can’t  be  done.”  But  in  that  case  “the  wish 
is  father  to  the  thought.”  The  plain  truth  is,  the  Capital¬ 
istic  Entrepreneur  group  does  not  want  to  see  it  done,  and 
hopes  that  it  will  not  be  done.  Indeed  the  Capitalistic 
Entrepreneur  group  will,  by  every  possible  means  at  its 
command,  fair  and  foul,  bitterly  oppose  and  viciously 
attack  the  New  Capitalism ;  for,  if  any  considerable  number 
of  men  and  women  were  to  subscribe  each  five  dollars  a 
month  for  a  period  of  say  three  years — it  would  mean  the 
doom  of  the  Capitalistic  System,  of  which  the  Capitalistic 
Entrepreneurs  are  today  the  chief  beneficiaries. 


256 


The  New  Capitalism 


If  anyone  says  that  it  can ’t  be  done,  I  ask :  1 4  Why  can ’t 
it  be  done?”  For  one  thing  the  Capitalistic  Entrepreneur 
group  has  seen  to  it  that  the  average  man  and  woman  who 
works,  shall  receive  no  greater  wage  or  salary  than  is  ab¬ 
solutely  necessary  to  subsist.  Yet,  in  spite  of  this  fact, 
eleven  million  of  them  have  saved,  probably  most  of  them 
by  denying  themselves  many  little  comforts  and  pleasures, 
six  billion  dollars,  which  they  have  put  into  the  savings 
banks  of  the  United  States.  This  alone,  for  one  thing, 
shows  what  can  be  done  when  there  is  the  will  to  do  it. 

One  W ay  of  Doing  It 

But  to  convince  the  doubting  Thomases,  and  merely  to 
show  what  the  non-investor  group  can  do,  once  it  makes 
up  its  mind,  suppose  I  were  to  counsel  or  suggest  that  the 
eleven  million  savings  depositors,  who  have  deposited  to 
their  credit  in  the  savings  banks  of  the  United  States  nearly 
six  billion  dollars,  withdraw  each  one  half  of  the  amount 
he  or  she  has  on  deposit;  or  that  one-half  of  the  savings 
depositors  withdraw  each  the  full  amount  of  his  or  her 
deposits  to  be  used  as  the  Basic  Capital  Fund  under  the 
New  Capitalism;  a  fund  of  three  billion  dollars  would  be 
created  thereby. 

Of  course  I  advise  no  such  thing ;  in  fact  I  counsel  against 
it :  for  these  two  cogent  reasons : 

First ,  the  withdrawal  of  so  large  an  amount,  within  a 
period  of  six  months  or  a  year,  would  not  only  seriously 
cripple  but  utterly  wreck  every  bank  in  the  United  States, 
ruin  practically  all,  or  most  of  the  industries,  and  bring 
on  a  condition  approximating  chaos. 

Secondly  (and  this  is  what  concerns  us  most),  the 
New  Order  would  not  be  in  any  position  to  advantageously 
employ  so  vast  a  sum  for  the  time  being.  Therefore,  to 
place  at  the  disposal  of  the  Newr  Order,  funds  considerably 
in  excess  of  all  practical  requirements,  would  bring  no  ma¬ 
terial  benefits  to  the  owners  of  said  funds.  For  all  imme¬ 
diate  and  essential  purposes  of  the  New  Order  during  the 


“Where  There’s  a  Will” 


257 


first  three  years,  an  amount  not  to  exceed  $300,000,000  a 
year  will  be  entirely  ample. 

My  counsel  to  all,  who,  after  reading  this  book,  see  the 
advantage  and  manifold  benefits  to  be  derived  from  the 
New  Capitalism,  is  to  leave  their  deposits  in  savings  banks 
intact  for  the  present,  or  at  least  not  to  draw  therefrom 
more  than  five  dollars  a  month,  or  a  total  of  sixty  dollars 
in  twelve  months — and  to  do  that  only  in  case  they  find  it 
impossible  to  save  the  requisite  amount  from  their  present 
earnings,  or  spare  it  from  whatever  funds  they  may  have 
in  hand,  or  immediately  available. 

The  Proof  of  the  Wage  Earner’s  Ability 

But  the  greatest  proof  of  what  the  people  can  do,  if  there 
is  real  need  or  inspiration  to  do  it,  is  to  be  found  in  what 
they  did  during  the  war.  Ten  million  men  and  women — 
most  of  them  wage  earners,  belonging  to  the  non-investor 
group — bought  twenty  billion  dollars  worth  of  Liberty 
bonds.  Beyond  a  doubt  wage  earners  purchased  several 
billion  dollars  worth,  paying  for  them,  if  not  spot  cash,  at 
least  within  a  few  months  from  date  of  purchase.  In  view 
of  which  fact,  will  anyone  say  that  it  is  unthinkable  that 
five  million  men  and  women  could  or  would  invest ,  for 
their  own  purposes  and  benefit,  five  dollars  a  month  for  a 
period  of  three  years? 

Another  Positive  Proof 

As  another  proof  of  what  can  be  done  I  point  to  the 
increases  in  rents  during  the  past  three  years.  Rents 
throughout  the  United  States  have  been  increased  from 
fifty  to  one  hundred  percent.  The  point  is  that  the  people 
have  paid,  and  are  today  paying,  the  increased  rental. 
(And 'by  the  way — quite  parenthetically — if  the  New  Order 
had  been  in  existence  and  in  operation  five  or  six  years  ago, 
landlords  could  not  have  raised  rents,  and  would  not  have 
dared  to  demand  the  outrageous  increases  they  did  exact 
and  are  at  present  exacting  from  the  people.  We  would 


258 


The  New  Capitalism 


have  opposed  our  united  strength  to  their  outrageous  pro¬ 
cedure.  And  I  wish  to  go  on  record  today  as  saying  that  if 
the  New  Order  comes  into  existence,  and  the  New  Capi¬ 
talism  begins  to  function — rents  will  be  lowered  again  to 
approximately  where  they  were  in  1914.  We  will  have  the 
power  to  compel  the  landlords  to  be  decent,  and  we  mean 
to  use  it.) 

But  taking  the  rent  situation  as  it  stands  today — the 
average  tenant  family  is  paying  several  hundred  dollars  a 
year  more  for  the  item  of  rent  than  formerly.  Perhaps  to 
pay  their  increases  in  rent  they  are  compelled  to  make  many 
sacrifices,  but  somehow  they  manage  to  pay  it.  Which  only 
proves  what  can  be  done. 

As  Seen  From  Another  Angle 

The  evidence  of  the  people’s  ability  to  provide  funds  for 
whatever  purpose,  is  accumulating.  On  March  18,  1921, 
P.  P.  Claxton,  National  Commissioner  of  Education,  in  a 
formal  statement  made  for  the  purpose  of  showing  that 
the  people  of  the  United  States  spent  more  money  for 
luxuries  than  for  education,  published  a  compilation  of 
comparative  statistics.  In  the  course  of  his  statement  Mr. 
Claxton  said: 

“According  to  Government  returns  for  1920,  the  people 
of  the  United  States  spent  for  luxuries  in  that  year 
$22,700,000,000  ;2  more  than  twenty-one  times  as  much  as 
they  spent  for  education  only  two  years  before,  and 
$6,000,000,000,  or  thirty  percent  more  than  we  have  spent 
for  education  in  all  our  history. 


2  While  I  doubt  that  the  people  spent  the  enormous  s.um  of  $22,700,- 
000,000  in  a  single  year  for  “luxuries”  I  will  not  controvert  the  Gov¬ 
ernment’s  figures  at  this  time.  But  I  will  say  that  when  correlated 
with  the  statistics  for  income,  investments,  increase  in  wealth,  in  capi¬ 
tal,  in  savings,  in  prices  and  rents,  volume  of  business,  wages  and 
salaries  and  necessary  expenditures  for  the  essential  living  items — 
that  there  is  a  contradiction  involved  somewhere.  Precisely  where  it  is 
not  the  purpose  of  this  book  to  discover. 


“mere  There’s  a  Will” 


259 


‘‘Expenditures  for  luxuries  in  1920  were  as  follows: 


For  Face  Powder,  Cosmetics,  Perfumes,  etc . $  750,000,000 

Furs .  300,000,000 

Soft  Drinks  .  350,000,000 

Toilet  Soaps .  400,000,000 

Cigarettes  .  800,000,000 

Cigars  .  510,000,000 

Tobacco  and  Snuff .  800,000,000 

Jewelry  .  500,000,000 

Musical  Instruments  .  250,000,000 

Luxurious  Service .  3,000,000,000 

Autos  . - .  2,000,000,000 

Joy  Rides,  Pleasure  Resorts  and  Races .  3,000,000,000 

Cake  and  Candy .  350,000,000 

Chewing  Gum  .  50,000,000 

Ice  Cream  .  250,000,000 

Food  Luxuries  .  5,000,000,000 


Who  can  tell  what  percentage  of  the  aggregate  expendi¬ 
ture  for  luxuries  was  made  by  the  four  million  investors 
and  their  families ;  and  what  percentage  by  the  wage  earn¬ 
ers — the  sixteen  million  non-investor  families?  But  no 
matter.  Will  any  one,  with  these  figures  before  him,  dare 
to  assert  that  if  the  people  of  the  United  States  wanted  to 
do  it,  they  could  not  raise,  for  the  purpose  of  their  economic 
emancipation,  or  any  other  purpose  they  might  have  in 
mind,  an  amount  considerably  in  excess  of  that  contem¬ 
plated  by  my  plan? 

What  the  Capitalists  Think 

Whatever  may  be  the  actual  facts  as  regards  the  spending 
proclivity  of  the  general  public,  it  is  at  least  interesting  to 
hear  what  the  opinion  is  in  Capitalistic  circles  with  regard 
to  the  saving  ability  of  the  wage  earners.  In  an  address3 
entitled  ‘  ‘  Keal  Labor  Problems, ’  ’  delivered  before  the  Chi¬ 
cago  Association  of  Commerce,  Dr.  Charles  A.  Eaton  said : 

“Where  are  we  to  find  new  resources  and  capital  for 
working  the  industries  of  the  country  ?  We  have  got  to  find 
it.  I  tell  you,  gentlemen,  that  it  is  right  here  in  the  surplus, 
the  savings  of  the  working  people  of  the  nation.  .  .  . 


3  Published  in  the  Association’s  official  organ,  Chicago  Commerce, 
March  12,  1921. 


260 


The  New  Capitalism 


‘ ‘There  are  billions  of  dollars  a  year  ordinarily  in  the 
savings  of  workers,  and  the  place  for  the  investment  of 
those  savings  is  in  the  industries  of  this  nation,  not  to  lay 
it  in  a  sock,  but  in  the  industries  of  this  nation.  .  .  . 

‘  ‘  I  believe  that  we  could  turn  into  the  industries  of  this 
country  about  two  billion  dollars  a  year  from  that  one 
source  alone,  and  every  investor  so  guaranteed  and  so  looked 
after  and  cared  for  and  educated,  would  become  a  tower  of 
strength  against  all  the  revolutionary  doctrines  of  radical¬ 
ism  and  stupidities  that  are  sweeping  over  the  world  today. 
There  is  a  great  field  there.’ ’ 

Dr.  Eaton’s  address  seems  to  have  found  favor  with 
Chamber  of  Commerce  Associations,  under  whose  auspices 
he  has  spoken  in  other  cities.  When  he  asks  “Where  are 
we  to  find  new  resources  and  capital,”  etc.,  and  says  “We 
have  got  to  find  it,”  etc.,  he  gives  the  unpleasant  impres¬ 
sion  of  being  a  delegated  spokesman  for,  or  a  component 
member  of,  the  Capitalistic  group.  At  any  rate  his  views, 
as  expressed  in  his  address  on  ‘  ‘  Real  Labor  Problems  ’  ’  are 
of  the  conventional  type,  and  the  kind  that  would  win 
approval  before  audiences  composed  of  members  of  Cham¬ 
ber  of  Commerce  Associations.  I  do  not  know  how  much 
study  Dr.  Eaton  has  given  to  his  subject;  nor  upon  what 
evidence,  or  statistics,  he  bases  his  statement  that  the  work¬ 
ing  people  can,  or  actually  do,  save  two  billion  dollars  a 
year.  But  assuming  that  he  is  right  with  regard  to  the 
amount — then  the  raising  of  less  than  one-sixth  of  that 
amount  a  year,  as  contemplated  by  my  plan,  would  seem 
to  be  comparatively  easy  and  simple. 

Capital  Inveigles  the  Wage  Earners 

But  whatever  the  actual  amount  of  the  savings  of  the 
wage  earners  of  the  United  States,  as  a  matter  of  fact  the 
Capitalistic  group  has  set  in  motion  its  machinery  gradually 
to  transfer  their  “savings”  from  the  socks  and  savings  ac¬ 
counts  into  the  treasuries  of  the  corporations  of  the  Capital¬ 
istic  System,  through  their  schemes  of  selling  stock  to  their 
employees  on  easy  payment  plans.  If  the  recently  published 
report  of  the  American  Telephone  and  Telegraph  Company, 


“Where  There’s  a  Will” 


261 


(according  to  which  128,000  of  the  186,342  stockholders  of 
record  on  December  31,  1921 — were  employees  of  the  Bell 
system  companies  “paying  for  stock  at  the  rate  of  a  few 
dollars  a  month”)  can  be  accepted  as  an  indication  of  the 
Capitalistic  design,  it  is  quite  likely  that  within  a  few  years 
there  will  be  more  than  five  million  employee  stockholders 
in  the  various  corporations,  and  their  holdings  in  the  aggre¬ 
gate  will  run  into  the  billions. 

It  does  not  seem  to  occur  to  the  corporation  employees 
who  invest  a  part  of  their  wages  in  the  stocks  of  the  corpo¬ 
rations  by  which  they  happen  to  be  employed,  that  they  are 
only  placing  their  savings  permanently  at  the  disposal  of 
the  very  group  that  is  exploiting  them ;  and  that  any  divi¬ 
dends  they  may  derive  from  stockholdership  in  such  cor¬ 
porations,  will  necessarily  be  paid  out  of  the  price  increases 
of  the  very  commodities  their  labor  produces.4 

Capital  Proposes 

My  proposal  that  the  wage  earners  of  the  United  States 
create  their  own  capital  funds  is  not  so  novel  as  it  would 
seem ;  a  suggestion  similar  to  mine  was  recently  made  by  a 
prominent  New  York  banker,  Mr.  Otto  H.  Kahn: 

“The  Labor  Unions  in  this  country  claim  a  membership 
of  4,500,000.  If  every  member  laid  aside  $1  each  week,  the 
available  sum  at  the  end  of  one  year  would  amount  to 
$234,000,000.  That  is  a  pretty  tidy  sum  to  start  business 
with,  in  various  lines.  Personally,  I  should  be  glad  to  see 
the  experiment  tried  and  should  welcome  its  success.  The 
more  workingmen  come  into  direct  contact  with,  and 
acquire  direct  knowledge  of,  the  realities,  the  complexities, 
cares  and  risks  of  business  conduct,  the  better  it  will  be.”5 


4  According  to  the  Boston  News  Bureau  there  has  been  a  gradual 
but  steady  decrease  in  the  number  of  shareholders  in  some  of  the 
big  corpo rations  during  1922  : 

“The  Pennsylvania  Railroad  reached  its  record  total  of  stockholders 
last  March,  at  141,921  ;  and  since  then  there  has  been  a  consecutive 
string  of  small  monthly  decreases  involving  a  reduction  by  September 
1,  of  4,038  holders.  The  Steel  Corporation  total  of  Common  share¬ 
holders  reached  its  peak  last  December,  at  107,439,  since  which  time 
there  has  been  a  decrease  of  11,132.”  (Literary  Digest,  Oct.  28,  1922.) 

5  Excerpt  from  an  article  “How  Shall  We  Get  Back  to  Better 
Business,”  by  Otto  H.  Kahn,  in  System  Magazine,  July,  1921. 


262 


The  New  Capitalism 


As  an  example  of  how  great  minds  run  in  the  same  chan¬ 
nel,  especially  if  their  owners  have  their  habitat  in  the 
Wall  Street  district,  read  this  from  a  Commencement  ad¬ 
dress  delivered  by  George  E.  Roberts,  Vice  President  of  the 
National  City  Bank  of  New  York: 

“  There  are  2,000,000  railroad  employes  in  the  United 
States  now  receiving  an  average  of  something  over  $1,500 
per  year  each.  If  they  would  save  $50.00  per  year  each, 
they  could  buy  control  of  the  New  York  Central  Railroad 
system  in  the  first  year,  and  of  all  the  systems  running  from 
Chicago  to  the  Atlantic  Coast  within  five  years,  at  the  pres¬ 
ent  market  prices  of  stocks.  ’  ’6 

Whether  these  suggestions,  made  almost  simultaneously 
by  Messrs.  Kahn  and  Roberts,  were  offered  in  good  faith 
or  not,  they  serve  the  purpose  of  showing  that  my  proposal 
to  the  wage  earners  and  the  non-investors  is  not  without 
merit.  The  distinctive  difference  between  their  proposal 
and  mine  is  that  our  savings  and  our  capital  funds  will  be 
put  into  our  banks,  not  into  their  banks,  and  to  be  used  by 
us,  not  by  them.  That’s  the  vital  difference. 

Has  the  Wage  Earner  Faith  in  Himself 

However,  it  is  clear  that  the  Capitalistic  group  has  great 
faith  in  the  ability  of  the  non-investors  to  save.  It  is,  there¬ 
fore,  inconceivable  that  the  non-investors  themselves  should 
have  less  confidence  in  their  ability  to  save,  or  hesitate  to 
invest  their  savings  for  their  own  benefit,  and  to  their  own 
lasting  advantage.  If  no  words  of  mine  can  persuade  them, 
let  them  be  animated  by  what  the  workers  of  England  and 
France  did  for  themselves  around  the  ’40s  of  the  last  cen¬ 
tury.  In  1844,  twenty-eight  workman  formed  a  cooperative 
association,7  beginning  with  a  capital  of  twenty-eight 

6  “Supremacy  of  the  Economic  Law,”  Commencement  Address  at 
the  Iowa  State  University,  June  15,  1920. 

7  These  cooperative  societies  steadily  increased  and  multiplied,  and 
today  are  found  everywhere  in  England  ;  indeed  they  can  be  said  to 
have  stood  between  the  English  workers  and  their  utter  degradation 
and  economic  enslavement.  Recently  published  statistics  show  4,000,000 
members,  and  their  yearly  sales  amounting  to  £200,000,000. 


“Where  There’s  a  Will” 


263 


pounds.  By  1860  the  membership  had  grown  to  3450,  and 
their  capital  to  37,710  pounds.  Bastiat  in  his  “Harmonies 
of  Political  Economy”  (published  about  1860)  speaking  of 
the  Friendly  Societies — “powerful  and  reciprocal  associa¬ 
tion  between  the  working  classes  ’  ’  says :  ‘  ‘  The  total  number 
of  these  associations  for  the  United  Kingdom  amounts  to 
33,223,  including  not  less  than  3,052,000  individuals — one- 
half  of  the  adult  population  of  Great  Britain.  .  .  .  Their 
revenue  is  five  millions  sterling,  and  their  accumulated  cap¬ 
ital  amounts  to  eleven  millions  and  two  hundred  thousand 
pounds. ’ 1 

John  Stuart  Mill  (whose  “Principles  of  Political  Econ¬ 
omy”  was  published  in  1848)  in  Book  IV,  Chapter  VII, 
gives  an  interesting  description  of  the  Industrial  Work¬ 
men  and  Farmers’  Cooperative  Association  which  sprang 
up  in  France  and  England  about  the  middle  of  the  nine¬ 
teenth  century.  In  France  at  that  time,  the  wage  of  four 
francs  a  day,  or  1200  francs  for  a  three  hundred  day  year, 
was  the  best  paid.  Speaking  of  the  Association  in  France, 
Mill  says :  (p.  360) 

“The  capital  of  most  of  the  Association  was  originally 
confined  to  the  few  tools  belonging  to  the  founders,  and  the 
small  means  which  could  be  collected  from  their  savings,  or 
which  were  lent  to  them  by  other  work-people  as  poor  as 
themselves.  In  some  cases,  however,  loans  of  capital  were 
made  to  them  by  the  republican  government ;  but  the  asso¬ 
ciations  which  obtained  these  advances,  or  at  least  which 
obtained  them  before  they  had  already  achieved  success, 
are,  it  appears,  in  general  by  no  means  the  most  prosperous. 
The  most  striking  instances  of  prosperity  are  in  the  case 
of  those  who  had  nothing  to  rely  on  but  their  own  slender 
means  and  the  small  loans  of  fellow  workmen ,  and  who 
lived  on  bread  and  water  while  they  devoted  the  surplus  of 
their  gains  to  the  foundation  of  a  capital.” 

The  Will  to  Do — Or  the  Alternative 

Surely  what  was  done  by  the  workmen  of  England  and 
France  seventy-five  years  ago,  under  exceedingly  adverse 


264 


The  New  Capitalism 


circumstances,  can  be  duplicated  by  the  wage  earners  of  the 
United  States  today,  where  conditions  are  more  favorable. 
I  do  not  know  how  many  millions,  or  billions,  of  dollars  a 
year  the  thirty  odd  million  men  and  women  workers  actu¬ 
ally  save  in  the  aggregate  out  of  their  wages ;  but  this  I  do 
know,  that  they  can,  and  that,  too,  without  half  trying,  save 
the  amount  that  I  consider  necessary  for  the  consummation 
and  complete  success  of  their  economic  emancipation  under 
the  New  Capitalism.  It  may  necessitate  a  sacrifice  on  the 
part  of  some,  for  millions  of  wage  earners  have  been  sub¬ 
jected  to  a  long  period  of  idleness;  some  have  consumed 
their  scant  surplus  (savings)  while  others  have  been 
plunged  into  debt. 

Indeed,  unless  the  wage  earners,  the  non-investors,  act 
promptly,  and  make  whatever  sacrifices  are  necessary  for 
a  year  or  two  or  three,  to  win  their  economic  independence 
— things  will  go  from  bad  to  worse.  The  hardships  to  which 
they  have  been  subjected  during  the  past  year  or  two  will 
become  chronic  and  irremediable. 

My  plan  proposes  that  5,000,000  organized  wage  earners 
raise  a  Basic  Capital  Fund  of  $300,000,000  a  year,  for  a 
period  of  three  years.  This  is  about  one-twentieth  of  the 
amount  which,  according  to  such  authorities  as  the  Iron 
Age  and  the  Chicago  Journal  of  Commerce,  the  wage  earn¬ 
ers  lost  during  1920-1921  through  enforced  unemployment. 
Unless  those  who  work  for  a  wage  bestir  themselves 
promptly  they  will  henceforth  sustain  losses  through  en¬ 
forced  idleness,  aggregating  annually  billions  of  dollars. 
It  is  up  to  them  to  decide  whether  it  is  to  their  best  inter¬ 
ests  to  save  and  invest  $300,000,000  a  year  for  a  period  of 
three  years  out  of  their  wages,  or  to  sustain  a  loss  of  several 
billions  a  year  on  account  of  idleness  or  irregular  employ¬ 
ment,  for  that  is  the  alternative. 


CHAPTER  XX 
“ — Therf/s  a  Way” 


THERE  there’s  a  will  there’s  a  way.”  I  am  en- 
%/%/  deavoring  in  this  book  to  point  the  way ;  the  will 
*  ▼  must  be  developed  by  those  most  concerned — by 
organized  Labor.  Organized  Labor,  as  yon  know,  has  been 
having  a  great  deal  of  trouble  with  organized  Capital,  and 
it  must  be  admitted  that  thus  far  organized  Capital  has 
had  the  upper  hand.  The  Capitalistic  Entrepreneurs  have 
the  whip  in  their  hand,  holding  it  more  firmly  than  ever. 
At  this  very  hour  they  are  using  it  with  telling  effect,  not 
only  upon  the  back  of  Labor  but  also  upon  the  backs  of 
all  the  non-investors. 

While  I  am  heralding  the  New  Order  as  theoretically 
composed  of  the  non-investors,  nevertheless  I  realize  that  it 
is  Labor — organized  Labor — that  will  have  to  bear  the  brunt 
of  the  battle.  Organized  Labor  must  do  the  fighting,  this 
time  not  for  itself  alone  but  for  the  non-investors — the  gen¬ 
eral  public  as  well.  The  plan  I  am  proposing  is  Labor’s  big 
opportunity.  It  is  the  only  chance  it  has  to  win,  and  with 
the  right  leadership  it  will  win ;  not  only  win  but  come  out 
of  the  contest  victorious  and  with  flying  colors. 

Today  the  formula  reads: 

Capital  plus  Labor  Equals  Uncontrolled  Power. 

If  my  plan  is  adopted  the  formula  henceforth  will  read : 

Labor  plus  Capital  Equals  Regulated  Strength. 

It  is  all  very  well  for  the  economists  to  say  that  Capital 
and  Labor  are  dependent  upon  each  other;  that  without 
Capital,  Labor  cannot  function.  Less  emphasis  is  placed  by 
them  on  the  indisputable  fact  that  without  Labor,  Capital 
must  corrode.  All  the  capital  in  the  world  cannot  make  the 
machinery  of  Industry  move  without  Labor.  But  Labor, 


265 


266 


The  New  Capitalism 


which  is  the  machinery  of  Industry,  can  set  itself  in  motion 
by  the  simple  expedient  of  providing  its  own  capital.  Cap¬ 
ital  is  powerless  to  supply  its  own  labor;  but  Labor  can 
supply  its  own  capital. 

According  to  the  present  arrangement  all  the  capital  is 
controlled  by  one  small,  organized,  coordinated  group,  while 
the  larger  group — Labor — has  not  yet  learned  the  lesson  to 
organize  and  coordinate  itself.  The  small,  organized,  co¬ 
ordinated  group  which  controls  capital,  dictates  to  Labor, 
while  Labor,  as  long  as  it  is  unorganized  or  only  partly 
organized,  and  uncoordinated,  does  not  control  its  own 
strength,  therefore  cannot  effectually  cope  with  Capital — 
therefore  cannot  protect  itself.  The  strongest  weapon  in 
the  hands  of  Capital  is  the  helplessness  of  Labor  as  a  force. 
Capital  is  powerful  only  as  long  as  it  can  control  capital 
and  the  forces  of  labor.  Deprived  of  these  advantages, 
Capital  becomes  helpless — as  helpless  as  Labor  is  today. 
Labor  is  weak  so  long  as  it  allows  a  small  group  of  Capital¬ 
ists  to  command  its  forces  and  to  use  its  strength.  If  Labor 
will  venture  to  employ  a  little  of  its  own  capital  it  will  be 
not  only  strong  and  mighty,  but  invulnerable,  invincible, 
dominant.  Hitherto  Labor  has  been  beholden  to  Capital; 
I  propose  that  henceforth  Capital  shall  be  beholden  to 
Labor. 

I  could  go  on  writing  in  this  fashion  by  the  hour,  but  to 
do  so  would  only  try  the  patience  of  the  readers  and  delay 
action.  Action  is  more  important  than  words  at  this  crit¬ 
ical  juncture.  Let  me,  therefore,  return  to  my  theme. 
Organized  Labor,  according  to  my  plan,  within  a  year’s 
time  will  have  a  fund  of  $300,000,000;  within  two  years 
$600,000,000 ;  and  at  the  end  of  three  years  $900,000,000  at 
its  disposal.  What  is  to  be  done  with  it?  To  what  use  is 
it  to  be  put  ?  I  ’ll  answer  without  any  waste  of  words  :  To 
wrest  control  of  the  industries,  one  by  one,  from  the  Cap¬ 
italistic  Entrepreneurs;  to  break  their  tyrannical  power; 
to  crush  the  despotism  of  the  Capitalistic-Mammonistic 
Entrepreneur  System. 


“ There’s  a  Way” 


267 


To  Those  Who  Cry  “Impossible!” 

1  ‘  Impossible ! ’  ’  you  will  say.  And  I  answer  that  it  is  not 
impossible. 

Let  us  assume  the  existence  of  our  Basic  Capital  Fund. 
Let  us  say  that  the  hour  for  action  has  arrived.  Let  us  say 
that  in  a  given  industry,  which  we  will  call  X,  there  are  ten 
plants — each  employing  one  thousand  workers — a  total  of 
ten  thousand  working  in  the  industry.  We  will  open  up 
negotiations  for  one  of  the  plants.  We  will,  of  course, 
ascertain  whether  the  owners  of  any  of  the  plants  in  the 
industry  X  are  willing  to  enter  into  negotiations  with  us 
for  the  purchase  of  their  plant.  If  they  are,  the  officials  of 
the  New  Order  will  ask  for  a  complete  and  truthful  state¬ 
ment  of  assets,  liabilities,  etc.,  and  all  data  essential  to 
ascertain  the  correct  status  of  their  business.  We  will  ask 
them  what  they  consider  a  fair  valuation  of  their  plant  and 
business;  the  amount  for  which  they  will  sell.  Actual  value 
alone  will  be  considered  by  us.  A  pric£  based  upon  an 
inflated  valuation  will  not  be  entertained  for  a  moment.  If 
a  plant  and  business  is  actually  worth  one  million  dollars, 
but  capitalized  for  five  million,  we  will  offer  to  take  it  over 
at  the  actual,  but  not  at  the  inflated,  valuation.  Over- 
capitalization  will  not  be  recognized  by  us.  We  repudiate 
“earning  power”  as  a  basis  for  determining  value.  That 
is  a  point  upon  which  there  can  be  no  compromise.  Under 
no  circumstances  whatever  will  we  ever  offer,  or  consent  to 
take  over,  a  plant  at  more  than  a  reasonable  value.  We  will 
be  fair  in  our  estimate  of  value ;  we  will  make  an  offer  that 
can  even  be  called  liberal;  we  do  not  propose  to  be  nig¬ 
gardly  or  to  take  advantage  of  anyone;  but  we  will  con¬ 
sistently  refuse  to  pay  a  price  in  excess  of  a  fair  and 
reasonable  value. 

If  the  owners  of  the  plant  will  accept  our  fair  offer  we 
will  take  over  the  plant  and  business  on  the  following 
terms :  we  will  pay  a  part  of  the  price  agreed  upon  in  cash, 
the  balance,  (for  which  bonds  will  be  issued)  to  be  paid  in 
yearly  instalments,  with  interest  at  say  five  percent.  Under 


268 


The  New  Capitalism 


certain  conditions  we  may  find  it  preferable  to  pay  the  full 
amount  involved  in  cash.  We  will,  furthermore,  offer  to 
retain  the  present  managers,  clerical  and  sales  force,  etc., 
for  it  will  be  our  plan  to  proceed  with  as  little  disturbance 
of  the  established  routine  as  possible.  All  this,  of  course, 
on  the  assumption  that  the  business  is  in  a  satisfactory  con¬ 
dition  at  the  time  of  negotiations. 

If,  however,  we  cannot  come  to  an  understanding  within 
a  reasonable  time,  or  if  our  fair  offer  is  declined,  that  ends 
negotiations  for  this  particular  plant  for  all  time.  Let  me 
emphasize  that  the  New  Order  intends  to  negotiate  only 
once  for  a  plant.  Our  fair  offer  having  been  rejected,  we 
will  immediately  proceed  to  erect  a  plant  of  our  own,  equip 
it  with  machinery,  etc.,  organize  the  trained  forces  neces¬ 
sary  for  the  conduct  of  the  business,  thoroughly  systematize 
the  plant,  etc.,  and  when  we  are  ready  to  operate  we  will 
call  for  one  thousand  workers,  taking  them  either  all  from 
one  plant  ( probably  the  one  with  which  we  have  had  recent 
negotiations)  or  else  a  hundred  from  each  of  the  ten  plants ; 
or  two  hundred  from  each  of  five  plants — whichever  way 
may  be  deemed  best  under  existing  circumstances. 

No  general,  inflexible  rule  can  be  laid  down  to  apply  to 
all  cases.  Each  set  of  conditions  must  dictate  the  policy  to 
be  followed  in  each  individual  case.  There  may  be  occa¬ 
sions,  even,  when  it  may  be  advisable  or  desirable  not  to 
make  overtures  for  the  acquisition  of  an  existing  plant.  It 
may  be  altogether  preferable  to  simply  go  ahead  and  erect 
and  equip  a  plant,  and  then  either  to  withdraw  the  required 
number  of  workers  from  a  single  plant,  or,  by  a  system  of 
distributive  requisition,  draw  a  certain  quota  from  each 
of  the  plants  constituting  the  industry. 

A  One-Tenth  Control 

In  either  event,  whether  we  purchase  a  plant  actually 
running  or  put  up  a  plant  of  our  own,  the  New  Order  will 
have  complete  control  of  one-tenth  of  a  given  industry. 
We  will  be  in  competition  with  the  C apitalistic  group  and 
System.  This  one-tenth  control  is  the  opening  wedge! 


“There’s  a  Way” 


269 


Whether  we  will  go  deeper  into  an  industry  or  enterprise 
will  depend  entirely  upon  the  Capitalistic  Entrepreneurs. 
If  they  are  disposed  to  be  decent  and  to  meet  our  compe¬ 
tition  fairly,  we  will  rest  content  with  the  one-tenth  control ; 
if  they  become  ugly  and  evince  a  disposition  to  fight  us 
unfairly,  or  to  crush  us,  we  shall  then  find  it  necessary  to 
enter  more  aggressively  into  whatever  industry,  or  indus¬ 
tries,  we  may  have  seen  fit  to  engage,  and  extend  our  con¬ 
trol,  in  due  time.  For  the  present  we  do  not  intend,  nor 
will  it  be  necessary,  to  take  over  an  entire  industry  in  order 
to  carry  out  the  immediate  purposes  of  our  plan. 

Once  we  actually  engage  in  an  industry,  a  scientific  study 
of  everything  that  enters  into  it  will  be  made ;  particularly 
as  regards  wages  and  cost  of  production.  I  hold  that  it  is 
possible  to  appreciably  bring  down  costs,  not  by  the  Cap¬ 
italistic  method  of  cutting  down  wages,  but  simply  by  elim¬ 
inating  or  reducing  a  number  of  the  items  which  now 
appear  as  “ fixed  charges,”  “overhead  expense,”  etc.  We 
will  have  a  decided  advantage  over  our  competitors  with 
regard  to  some  of  these  items,  wrhich  now  enter  into  cost, 
for  the  reason  that  in  every  instance  we  will  begin  business 
with  a  clean  slate  and  no  handicaps.  Our  plant  will  be 
capitalized  at  its  actual,  not  at  an  inflated  and  fictitious 
valuation.  And  because  we  will  not  be  overcapitalized  we 
shall  have  no  dividends  to  earn  or  pay  on  watered  stock — 
on  Capital  that  does  not  exist.  Ample  working  capital  will 
be  provided  by  ourselves ,  therefore  we  will  have  no  interest 
to  pay  to  any  Capitalistic  banks.  These  are  only  a  few  of 
the  more  obvious  advantages,  and  I  mention  them  merely 
to  indicate  the  possibilities  of  the  New  Capitalism  under 
the  regime  of  the  New  Order. 

Verb  urn  Sapientibus  Satis 

The  Old  Order — the  present  Capitalistic  Entrepreneur 
System — quite  naturally  will  not  welcome  our  entrance  into 
the  sundry  fields  of  industry,  now  entirely  controlled  by 
them,  with  shouts  of  delight,  but  rather  with  a  chorus  cry 
of  rage.  Indeed  it  is  a  dead  certainty  that  every  obstacle 


270 


The  New  Capitalism 


will  be  put  into  our  way  in  an  effort  to  make  the  carrying 
out  of  our  plan  impossible,  or  at  least  difficult.  But  we 
expect  that,  and  will  be  prepared  to  counter  any  attack  and 
meet  any  emergency. 

Incidentally,  let  me  say  that  if  we  do  not  succeed  in  pur¬ 
chasing  a  plant  already  running,  and  will  be  put  to  the 
necessity  of  building  a  new  plant,  it  is  easy  to  see  that  there 
will  be  an  excess  of  plants — one  that  is  vacant  and  unpro¬ 
ductive,  therefore  profitless  to  the  owners — a  dead  invest¬ 
ment  on  the  hands  of  the  Capitalistic  group.  Does  the 
Capitalistic  System  relish  the  prospect?  Can  the  Capital¬ 
istic  Entrepreneurs  read  between  the  lines? 

The  Basic  Principle — Plus 

This  briefly  states  the  basic  principle  of  my  plan  with 
regard  to  the  industries,  and  in  which  organized  wage 
earners  are  particularly  interested ;  while  at  the  same  time 
showing  possibilities  of  its  development  and  application  to 
other  than  industrial  lines ;  besides  giving  a  gentle  hint  to 
the  Capitalistic  Entrepreneurs  who  have  deluded  them¬ 
selves  into  the  belief  that  they  are  invulnerable,  and  that 
their  dominant  position  is  impregnable. 

To  clearly  state  the  principle  and  show  the  possibilities 
of  my  plan,  and  incidentally  to  sound  a  note  of  warning  to 
our  economic  overlords  is  all  I  propose  to  do  for  the  present. 

Not  Revealing  All 

I  have  no  intention  of  revealing  my  whole  plan  at  this 
time,  nor  how  all  its  details  will  be  carried  out.  That  would 
be  the  height  of  folly,  for  the  enemy  would  learn  precisely 
what  to  expect  and  would,  beyond  a  doubt,  attempt  to  pre¬ 
pare  to  meet  every  emergency.  I  prefer  to  keep  him  guess¬ 
ing,  and  in  the  dark.  Therefore  I  am  unfolding  only  as 
much  as  is  good  for  him  and  safe  for  us.  I  am  willing  to 
play  his  game  of  cards,  but  I  will  not  show  him  the  cards  I 
hold  in  my  hand. 

A  general  plans  his  campaign  with  care  and  caution,  and 
decides  on  his  line  of  action  with  boldness  and  courage,  but 


“There’s  a  Way” 


271 


he  does  not  publish  his  intentions  where  the  enemy  may 
read  them  and  so  prepare  against  them.  I  will  not  say 
precisely  just  how  we  will  proceed.  I  will  not  say  just  how, 
and  when,  and  where  we  will  strike.  I  will  not  reveal,  at 
this  time,  what  industries  we  will  negotiate  for,  or  enter 
first.  Suffice  it  to  make  clear  that  we  will  go  forward,  and 
that  we  will  strike  when  we  are  quite  ready,  often  in  most 
unexpected  places — and  proceed  in  a  manner  that  cannot 
be  foreseen  nor  prepared  against.  My  whole  plan  of  action 
is  decided  upon;  and  all  will,  in  due  time,  be  unfolded  to 
those  who  have  a  right  to  hear  and  who  will  be  entrusted 
with  the  carrying  out  of  every  detail  of  my  plan. 

Besides,  these  are  things  that  will  concern  us  only  after 
we  are  organized  and  have  created  our  Basic  Capital  Fund. 
Consequently  I  shall  confine  myself  chiefly  to  a  discussion 
of  whatever  has  to  do  with  the  essential  features  of  my  plan. 

The  Supreme  Board  of  Trustees 

I  have  already  stated  that  the  New  Order  is  to  be  a 
nation  wide  organization.  Needless  to  say,  it  will  be  builded 
around  a  Central  organization,  the  Supreme  officials  of 
which  will  have  plenary  power ;  they  will  be  the  dominant 
and  directing  heads  and  constitute  a  national  Trusteeship 
for  the  members  of  the  New  Order.  And  since  anyone — 
whether  an  industrial  worker  or  engaged  in  any  other  occu¬ 
pation — can  become  a  member  of  the  New  Order,  I  have  in 
mind  that  the  national  officers  shall  be  composed  of  say 
twelve  men — six  chosen  from  and  representing  organized 
Labor,  and  six  chosen  from  and  representing  that  portion 
of  the  non-investor  public  engaged  in  other  pursuits.  These 
twelve  men  are  the  Supreme  Board  of  Trustees.  The  voting 
power,  the  directing  power,  in  brief  plenary  power,  rests 
entirely  in  their  hands.  The  selection  of  these  twelve  men 
is  of  the  utmost  importance.  They  must  be  men  of  more 
than  ordinary  intelligence  and  ability;  sincere,  unselfish, 
just,  of  tested  integrity,  proved  rectitude  and  unwavering 
fidelity;  men  of  principle,  character  and  conscience — the 
soul  of  honor ;  men  of  unquestioned  honesty,  and,  above  all , 


272 


The  New  Capitalism 


incorruptible;  in  brief,  men  who  will  do  the  right,  and  who 
are  willing  to  die  for  what  they  believe  to  be  the  right. 

I  have  been  told  that  it  wTill  not  be  easy  to  find  twelve 
such  men,  but  I  am  confident  that  they  can  be  found. 
Upon  these  twelve  men  the  success  of  the  New  Capitalism 
depends.  You  may  organize,  five  million,  ten  million, 
twenty  million  men  and  women ;  you  may  raise  three  hun¬ 
dred  million,  or  three  billion,  or  thirty  billion  of  capital,  but 
unless  the  twelve  men  who  are  to  be  ‘ 1  the  head  and  front  ’ ’ 
of  the  New  Order — and  into  whose  hands  the  welfare  of 
eighty  million  men,  women  and  children  is  to  be  entrusted, 
can  be  found,  nothing  can  be  accomplished.  Assuming  that 
these  twelve  men  can  be  found  and  are  willing  to  serve  the 
people  for  nothing  more  than  a  reasonable  salary — a  recom¬ 
pense  hardly  proportionate  to  the  service  they  will  be  ex¬ 
pected  to  render  to  the  public — an  organization  of  unbreak¬ 
able  strength  will  have  been  launched. 

Need  I  stress  here  that  the  utmost  care  will  be  exercised 
in  so  organizing  that  at  no  time  can  control  be  taken  away 
from  the  New  Order?  My  plan  guards  against  every 
eventuality;  indeed  has  taken  every  possible  contingency, 
every  exigency  that  may  arise,  into  consideration.  Every 
precaution  will  be  taken.  We’ll  take  no  chances  of  any 
kind.  Our  stipulations  will  be  clear  and  clean  cut ;  our  con¬ 
tracts  iron  bound.  This  one  lesson  wre  have  learned  from 
the  Capitalistic  Entrepreneurs,  and  we  will  use  it  for  the 
benefit  of  all  the  people.  Plenary  Power,  supreme  author¬ 
ity,  absolute  control,  and  complete  stewardship  is  vested  in 
the  twelve  Supreme  officers  of  the  New  Order — the  Supreme 
Board  of  Trustees  of  our  Economic  Commonwealth. 

A  Move  in  the  Right  Direction 

While  we  may  depart  from  the  corporation  organization 
methods  in  vogue  today,  nevertheless  in  describing  what  we 
intend  to  do  or  how  we  intend  to  proceed,  I  shall  use  the 
terms  that  are  current.  Consequently  I’ll  put  it  this  way. 
Any  industry  or  enterprise  into  which  we  may  enter,  will 
be  capitalized  at  actual  value  fairly  determined.  A  safe 


‘‘There’s  a  Way” 


273 


quota  of  the  stock  will  be  common  stock.  This  will  be  placed 
in  trust  in  the  hands  of  the  twelve  national  Supreme  officers, 
constituting  the  Supreme  Board  of  Trustees.  The  balance 
of  our  stock  issue  will  be  preferred  stock,  divided  into  two 
equal  parts.  One-half  of  this  preferred  stock  will  be  offered 
to  those  workers  within  the  industry  concerned,  and  to  the 
workers  (wage  earners)  in  whatever  industries  they  may  be 
engaged ;  the  other  half  will  be  offered  to  the  general  public 
— that  is  to  anyone  not  engaged  in  the  industries — in  brief 
to  whoever  cares  to  invest.  None  will  be  excluded;  and 
there  will  be  no  discrimination. 

But  since  I  am  assuming  that  the  New  Order,  for  the  first 
three  years,  will  be  composed  probably  wholly  of  organized 
wage  earners,  let  me  return  to  a  consideration  of  their  exact 
status  under  the  New  Capitalism.  You  will  recall  that  each 
is  to  pay  into  the  Treasury  of  the  New  Order,  five  dollars 
a  month,  or  sixty  dollars  a  year,  for  a  period  of  three 
years.  This  amount,  be  it  clearly  understood,  is  not  to  be 
a  contribution  or  donation.  Ten  dollars  a  year  will  be  set 
aside  as  membership  fee,  to  be  used  as  I  shall  presently 
explain;  and  fifty  dollars  will  be  considered  as  an  invest¬ 
ment  and  treated  as  such.  For  every  fifty  dollars  a  Cer¬ 
tificate  of  Deposit  will  be  issued  until  such  time  that  we 
actually  enter  into  an  industry,  when  it  will  be  exchanged 
for  a  stock  certificate.  From  that  moment  each  will  become 
a  preferred  stockholder,  or  rather  stockowner,  in  whatever 
plant  or  plants  we  may  take  over  or  erect.  Thus  the  virtual 
ownership  of  the  plants  of  a  given  industry  will  be  vested 
in  the  workers  themselves.  The  control  of  the  plant  or 
plants  in  whatever  industries  we  may  enter,  will,  of  course, 
be  held  in  trust  by  the  Supreme  Board  of  Trustees. 

When  Wage  Earners  Become  Investors 

Thus  the  wage  earner  automatically  becomes  an  investor. 
Consequently  from  the  time  we  go  into  active  operation  the 
workers  holding  the  preferred  stock  in  a  given  industry  will 
draw,  in  addition  to  their  wages,  dividends  of  a  minimum 
of  six  percent  (which  will  be  increased  when  and  as  con- 


274 


The  New  Capitalism 


ditions  warrant).  Workers  in  a  given  industry  can  also 
obtain  stock  in  any  other  industry  they  may  desire.  More¬ 
over,  they  are  not  limited  as  to  any  amount.  Any  member 
desiring  to  invest  larger  amounts  has  the  privilege  to  do  so. 

Needless  to  say,  since  there  are  five  million  members  rep¬ 
resenting,  perhaps,  several  hundred  different  trades,  or 
engaged  in  different  crafts,  not  all  of  which  will  be  affected 
during  the  first  few  years  of  our  existence,  provision  will 
be  made  so  that  all  may  have  an  opportunity  to  participate 
in  one  or  the  other  enterprise  in  which  we  might  be  inter¬ 
ested,  for,  let  it  be  remembered,  we  will  not  concern  our¬ 
selves  exclusively  with  industrial  enterprises ;  we  will  strike 
out  into  sundry  directions  in  our  endeavor  to  break  the 
despotic  tyranny  of  the  Capitalistic-Mammonistic  System, 
and  gain  our  economic  independence. 

The  Membership  Fee 

The  Membership  Pee,  as  I  have  stated,  is  to  be  ten  dol¬ 
lars.  I  have  lived  for  years  with  my  subject;  I  have  care¬ 
fully  studied  my  plan  from  every  possible  angle ;  I  know  its 
every  possibility,  its  every  demand;  its  every  requisite  for 
success.  I  have  made  a  complete  list  of  the  things  that  must 
be  done,  and  a  tentative  estimate  of  cost,  and  can  say  that 
the  fifty  million  a  year  I  am  setting  aside  will  be  ample  for 
all  essential  and  imperative  purposes. 

First  of  all ,  it  will  be  necessary  to  build  and  maintain  an 
organization  throughout  the  nation.  That  is  important, 
and  whatever  the  cost  may  be  there  can  be  no  slighting  of 
a  single  detail.  The  organization  of  the  New  Order  will  call 
for  the  best  quality  of  “ brains” — and  a  goodly  quantity 
of  it.  If  any  one  imagines  that  I  am  proposing  a  kinder¬ 
garten  association  let  him  disabuse  his  mind  quickly.  What 
we  intend  to  do  will  be  no  child’s  play.  We  shall  have  to 
deal  with  a  dangerous,  troublesome,  resourceful  and  tricky 
adversary,  a  combination  of  men  who  have  been  in  supreme 
and  unchallenged  control  for  decades  of  years,  and  who 
naturally  may  be  expected  to  put  up  a  desperate  fight,  nor 
scruple  about  the  weapons  with  which  they  mean  to  combat 


“There’s  a  Way” 


275 


us.  None  realizes  as  I  do  the  tremendous  power  of  these 
unscrupulous  men.  I  am  not  deluding  myself  for  an 
instant.  But  more  of  that  anon. 

In  the  second  place ,  my  plan  includes  the  establish¬ 
ment  of  Colleges  and  Institutes,  in  which  there  will  be  a 
number  of  important  departments:  Technical,  scientific 
and  research;  legal;  legislative;  statistical,  etc.  Political 
Economy,  Accounting  and  Cost  Finding  Systems,  Banks, 
Finance,  Exchange,  and  Commerce,  will  be  subjected  to  a 
thorough  and  complete  analysis.  We  will  get  at  the  bottom 
of  the  Wage  Question,  Taxes,  Tariffs,  etc.  In  brief  the  false 
principles  around  which  our  economic  life  has  been  twisted, 
will  be  subjected  to  expert  investigation  and  analysis  in 
an  endeavor  to  unearth  the  Facts  and  discover  the  Truth. 

But  the  most  important  and  most  necessary  thing  of  all 
is  the  building  up  and  maintenance  of  a  powerful  and  influ¬ 
ential  national  press.  This  includes  the  issuing  and  circu¬ 
lation  of  the  organization ’s  publications  and  whatever  other 
literature  may  be  deemed  necessary  to  bring  and  keep  the 
New  Order,  its  purposes  and  work,  its  findings  and  achieve¬ 
ments,  conspicuously  before  the  public.  Without  a  great 
national  press  and  “pitiless  publicity”  service,  the  New 
Order  would  surely  fail.  With  this  important  institution 
provided  for  we  are  prepared  to  meet  any  contingency  that 
might  arise,  or  cope  with  any  conditions  that  may  be  created 
by  those  who  do  not  want  to  see  us  succeed. 

The  Capitalistic  Cry  of  Horror 

The  Capitalistic  Entrepreneur  group  may  be  depended 
upon  to  raise  a  cry  of  horror  and  indignation  at  so  great  a 
“waste”  of  the  “poor  wage  earners’  ”  money.  That  is  a 
favorite  trick  of  theirs.  Listen,  for  example,  to  this  howl 
from  the  Wall  Street  Journal,  quoted  in  the  Chicago  Jour¬ 
nal  of  Commerce,  (November  11,  1920)  : 

“No  free  country  can  afford  to  tolerate  an  irresponsible 
central  organization  like  the  American  Federation  of  Labor, 
with  the  stupendous  annual  income  of  $48,000,000,  in  a 


276  The  New  Capitalism 

position  where  it  can  defy  the  common  law  as  applied  to 
conspiracy.  ’ 7 

If  no  “free  country”  can  afford  to  “tolerate”  a  “cen¬ 
tral  organization  ’  ’  that  has  ‘  ‘  a  stupendous  annual  income  ’  ’ 
($48,000,000) — ( provided  out  of  its  own  wages )  let  me  say 
to  all  friends,  supporters,  defenders  and  beneficiaries  of  the 
Capitalistic  Entrepreneur  System  that  an  enslaved  people 
intends  not  only  to  create  a  “central  organization”  but  to 
provide,  out  of  its  own  wages  (and  savings),  many  times 
the  “stupendous”  sum  complained  of  by  the  Wall  Street 
Journal — for  the  specific  purpose  of  combating  those  who 
for  years  have  defied  not  only  the  common  law  but  the  laws 
of  simple  justice,  ordinary  honesty,  and  common  decency; 
and  who  are  today  engaged  in  a  conspiracy  to  crush  Labor 
and  reduce  the  populace  to  a  condition  of  hopeless  servitude 
and  permanent  poverty.  And  they  will  pay  whatever  price, 
figured  in  sacrifice,  and  dollars  and  cents,  may  he  necessary 
to  curb,  or  if  necessary  crush,  the  cruel,  inhuman  and  mon¬ 
strous  Capitalistic-Mammonistic  Entrepreneur  System. 

The  point  on  which  the  Capitalistic  group  will  probably 
concentrate  its  attacks,  is  the  salaries  that  it  will  be  neces¬ 
sary  to  pay  to  those  who  will  serve  the  New  Order  in  one 
cayjacity  or  another.  When  the  Grain  Growers  of  the 
United  States,  in  order  to  break  the  grip  of  the  Capitalistic- 
Mammonistic  group  upon  their  throat,  recently  formed 
a  national  organization,  sure  enough,  a  cry  was  raised  that 
they  were  paying  their  officers  big  salaries.  So  vicious  was 
the  propaganda  set  in  motion  by  the  interests  anxious  to 
break  the  new  organization,  that  the  United  States  Grain 
Growers,  Inc.,  found  it  necessary  to  make  a  public  defensive 
statement.  I  quote  from  the  Commercial  Edition  of  the 
Chicago  Herald  Examiner,  (June  27,  1921)  : 

“Enemies  of  the  movement,”  the  statement  asserts,  “are 
attempting  to  discredit  it  in  the  eyes  of  the  farmers  by  mag¬ 
nifying  the  importance  of  the  fact  that  at  the  first  meeting 
of  the  board  of  directors,  salaries  for  officers  were  fixed  as 
follows:  President,  $16,000;  Secretary,  $12,000;  Treas¬ 
urer,  $15,000,  and  General  Counsel,  $15,000.” 


“ There’s  a  Way” 


277 


Talk  about  big  salaries !  According  to  the  1918  Federal 
Income  Tax  Report  the  officials  in  317,579  establishments  in 
that  year  paid  themselves  as  ‘  ‘  compensation,  ’  ’  the  enor¬ 
mous  sum  of  $2,225,543,259.  In  other  words  each  of  the 
sixteen  million  wage  earner  or  non-investor  families  in 
1918,  contributed  an  average  of  $139,  merely  to  pay  the 
salaries  of  the  317,579  corporation  officials.  The  fifty  mil¬ 
lion  dollars  we  propose  to  set  aside,  out  of  our  wages,  be  it 
remembered,  for  all  purposes,  is  less  than  three  percent  of 
the  amount  with  which  the  corporation  officials  reward 
their  services  to  themselves — and  which  amount  is  charged 
up  to  the  public  as  “cost  of  production.” 

The  Adequacy  of  Our  Capital  Fund 

There  is  one  point  on  which  I  desire  to  give  a  little  light 
in  this  chapter.  There  will  be  those  whose  mentality,  accus¬ 
tomed  to  move  within  circumscribed  limits,  cannot  visualize 
what  lies  beyond  their  radius  of  immediate  perception.  To 
these  a  Basic  Capital  Fund  aggregating  only  three-fourths 
of  a  billion  will  seem  altogether  inadequate  for  our  economic 
regeneration.  They  forget  that  one  of  the  coordinate  pur¬ 
poses  of  my  plan  is  to  bring  into  existence  a  chain  of  banks 
or  financial  centers  strategically  placed,  all  under  our  im¬ 
mediate  control.  They  forget  that  business  is  not  done 
exclusively  with  cash  capital ;  credit  plays  a  prominent  part. 
To  what  extent  credit  is  employed  may  be  best  judged  by 
observing  the  financial  practices  of  the  Capitalistic  System. 
It  is  no  secret  that  ninety-five  percent  of  the  country ’s  bus¬ 
iness  is  done  on  the  credit  basis,  that  is,  for  every  one  dollar 
of  actual  cash  capital,  nineteen  dollars  of  credit  are  im¬ 
pressed  into  service,  that  is,  extended  by  those  who  control 
the  nation’s  finances  through  the  medium  of  sundry  inter¬ 
related  banking  and  money  institutions — to  those  in  the 
industrial  and  other  enterprises — by  the  Captains  of 
Finance  to  the  Captains  of  Industry,  by  the  Capitalists 
to  the  Entrepreneurs — in  brief  by  themselves,  to  themselves 
— and  for  their  own  exclusive  benefit  and  profit. 


278 


The  New  Capitalism 


If  the  New  Capitalism  were  to  adopt  precisely  the  same 
tactics  that  the  Capitalistic  Entrepreneur  System  employs, 
and  set  in  motion  the  identical  machinery,  our  first  year’s 
Basic  Capital  Fund  of  $300,000,000  would  be  a  basis  for  a 
volume  of  credit  nineteen  times  greater — or  a  total  of 
$5,700,000,000;  and  the  larger  Basic  Capital  Fund  of 
$900,000,000,  accumulated  during  a  period  of  three  years, 
would  represent  credit  possibilities  aggregating  more  than 
17  billion  dollars. 

In  saying  all  this  I  want  to  be  understood  as  merely 
emphasizing  the  credit  utilization  of  Capital  as  practiced 
under  the  present  control  of  the  Capitalistic  Entrepreneur 
System.  That  there  are  dangers  a-plenty  in  such  a  condi¬ 
tion  must  be  apparent  to  all  those  who  have  more  than  an 
elementary  understanding  of  financial  practices.  The  dan¬ 
ger  of  collapse  is  ever  present,  and  every  possible  precau¬ 
tion  must  be  taken.  I  speak  of  these  things  at  this  time  and 
in  this  place  merely  to  show  what  the  present  Capitalistic 
System  has  discovered  to  be  the  safe,  not  to  say  legitimate, 
limit  of  possibilities1 — possibilities  which  I  should  scruple 
to  exploit,  as  well  as  hesitate  to  exhaust,  preferring  always 
to  keep  rather  within  the  limits  of  a  sounded  safety  than  to 
venture  into  the  uncharted  seas  of  possibilities;  for,  as  I 
have  pointed  out  in  another  chapter,  one  of  the  causes  of 
high  prices  is  directly  traceable  to  the  almost  limitless 
employment  of  credit.  The  greater  the  employment  of 
credit  in  the  conduct  of  business  the  greater  the  load  of 
interest  charges  upon  the  people,  and,  therefore,  we  will 
be  careful  not  to  go  beyond  the  reasonable,  requisite  and 
always  safe  limits  in  this  important  matter. 

When  Finance  is  King 

I  will  merely  hint  at  present  that  in  the  science  of  finance 
there  is  less  of  science  than  of  sorcery.  The- miracles  of 

i  Writing  on  the  Foreign  Trade  Financing  Corporation  which  was 
organized  with  $100,000,000,  C.  B.  Evans,  in  the  Chicago  Journal  of 
Commerce .  January  17,  1921,  said:  “In  the  development  of  the 
prospectus  the  same  capitalization  of  $100,000,000  with  power  to 
issue  debentures  up  to  $1,000,000,000,  as  first  proposed,  is  adhered 
to.”  Ergo,  nine  dollars  of  credit  inflation  for  every  dollar  of  capital. 


“There’s  a  Waf  ’ 


279 


banking  can  be  explained  by  chicanery  rather  than  by 
supernatural  powers.  I  am  purposely  omitting  a  chapter 
dealing  with  ‘‘Banks  and  Their  Practices/ ’  because  in  it 
I  would  be  compelled  to  say  many  things  which  had  better 
be  left  unsaid  at  this  critical  time.  Nevertheless,  a  little 
light  from  authentic  sources  will  give  verisimilitude  to  some 
of  my  statements  with  regard  to  banking  practices  made 
in  this  chapter. 

Finance  is  King,  and  “The  King  Can  Do  No  Wrong!” 
It  seems  the  dominant  group  of  the  banking  and  finan¬ 
cial  system  holds  itself  above  accountability  and  entirely 
removed  from  the  sphere  of  criticism.  It  resents  having  any 
of  its  tactics  questioned  or  any  of  its  transactions  investi¬ 
gated.  As  an  example,  in  the  case  of  the  New  York  Legis¬ 
lative  Committee,  Samuel  Untermyer,  Counsel  (January  5, 
1921)  proposed  that  the  great  financial  institutions  and 
insurance  companies  be  investigated.  Mr.  Untermyer 
declared  that  “an  insidious  campaign  through  hired  propa¬ 
gandists  was  on,  to  defeat  the  contemplated  work  of  the 
Committee  in  investigating  the  loan  market.” 

Or  read  this  excerpt  from  an  editorial  in  Forbes  Maga¬ 
zine  (July  9,  1921)  : 

“Incidentally,  that  was  a  sorry  figure  cut  by  Forrest  F. 
Dryden,  president  of  the  Prudential,  when  he  refused  to 
explain  certain  financial  transactions  which  very  badly 
needed  explaining,  that  is,  if  Mr.  Dryden  hoped  to  retain 
a  reputation  for  honesty.  The  only  deduction  to  be  drawn 
from  Mr.  Dryden ’s  willingness  to  be  held  in  contempt 
rather  than  lay  bare  the  truth,  and  from  Mr.  Lindabury’s 
excited  efforts  to  butt  in  to  muzzle  his  Prudential  colleague, 
is  that  the  facts  could  not  stand  daylight.  From  what  was 
revealed  by  Mr.  Untermyer,  it  would  look  as  if  the  Pru¬ 
dential  insiders  had  favored  their  own  pockets.” 

Or  this  news-item  from  a  daily  paper : 

‘  ‘  The  Pittsburgh  Clearing  House  Association  was  accused 
by  Comptroller  Williams  of  the  Currency  today  (February 
25)  of  having  forbidden  its  member  banks  to  furnish  data 


280 


The  New  Capitalism 


asked  for  in  the  national  bank  call  issued  yesterday. ?  ’  ( Her¬ 
ald  Examiner ,  February  26,  1921). 

A  Callous  Conscience  and  Sensitive  Nerves 

At  the  American  Bankers  Association  in  October,  1920, 
there  was  complete  unanimity  with  regard  to  every  reso¬ 
lution.  “The  only  resolution  which  caused  any  discussion 
was  that  which  referred  to  the  United  States  Comptroller 
of  the  Currency.  That  officer  had  one  lone  defender  on  the 
floor  of  the  Convention,  and  the  resolution  as  presented 
was  adopted  with  only  one  dissenting  vote.” 

John  Skelton  Williams,  Comptroller  of  the  Currency,  had 
some  time  before  charged  that  certain  New  York  banks  were 
exacting  unnecessarily  high  rates  of  interest.  In  passing 
it  may  be  stated  that  Comptroller  Williams  stated  what  are 
known  facts.  Nevertheless  the  sensitive  body  known  as  the 
American  Bankers  Association  strongly  disapproved  of 
“such  utterances  by  a  public  official,”  and  in  a  resolution 
declared  that  they  were  calculated  ‘  ‘  to  create  an  unfounded 
hostility  between  bankers  and  the  public,  even  to  breed 
violence  of  action  and  dangerous  disturbance  of  the  public 
mind.  ”2 

No!  It  is  not  at  all  remarkable  that  those  most  con¬ 
cerned  have  invested  their  sundry  financial  transactions 
with  an  air  of  mystery,  and  that  they  are  loath  to  reveal 
how  they  perform  their  tricks.  But  these  are  matters 
into  which  we  will  go  more  deeply  when  the  proper  time 
arrives.3 

Now  or  Never 

There  was  never  so  propitious  a  time  as  the  present  to 
institute  a  New  Economic  Order  and  inaugurate  the  New 
Capitalism.  We  will  have  the  great  advantage  of  begin¬ 
ning  with  a  clean  slate  in  every  way.  Besides  the  banking, 

•  •  # 

2  Journal  of  the  American  Bankers  Association,  November,  1920. 

3The  Pujo  Commission  in  its  report  stated :  “Most  of  the  State 
institutions  and  of  the  principal  national  banks  in  the  reserve  cities 
of  New  York,  Philadelphia,  Boston  and  St.  Louis,  refuse  or  omitted 
to  make  any  return  whatever  and  denied  the  power  or  jurisdiction 
of  the  committee  to  inquire  into  their  affairs.” 


“There’s  a  Way” 


281 


industrial  and  commercial  interests,  in  brief  the  Capital¬ 
istic  Entrepreneurs,  are  staggering  under  a  tremendous 
load.  We  do  not  want  to  take  advantage  of  their  dilemma, 
but  it  cannot  be  denied  that  the  present  situation  is  fraught 
with  manifold  opportunities  for  us.  This,  of  all  times,  is 
the  opportune  moment  for  setting  in  motion  the  wheels  of 
the  New  Order — the  machinery  of  the  New  Capitalism. 

Now  is  the  time  to  organize ;  now  is  the  time  to  raise  the 
Basic  Capital  Fund;  now  is  the  time  to  plan  and  arrange 
all  preliminaries  so  as  to  be  ready  to  strike  when  the  favor¬ 
able  hour  arrives.  Now  or  never !  Indeed  we  should  have 
acted  twenty  years  ago,  before  the  Capitalistic  Entrepre¬ 
neur  System  had  so  thoroughly  entrenched  itself.  It  would 
have  been  much  easier  to  put  incipient  Capitalistic  Entre¬ 
preneur  power  to  rout  in  1900,  or  say  1905,  than  it  will  be 
today.  It  would  have  been  easier  for  the  masses  of  the 
people  to  throw  off  the  shackles  with  which  they  were  being 
bound ;  easier  for  them  to  crush  the  incubus ;  easier  to  drive 
the  beast  out  of  its  lair;  easier  to  clip  its  claws;  easier  to 
extract  the  fangs  of  the  monster. 

Twenty  years  ago  it  would  have  been  possible  to  hinder 
the  ascendancy  to  dominance  of  the  small  group  of  men 
who  today  are  the  nub  of  the  Capitalistic-Mammonistic 
Entrepreneur  System.  Today,  I  admit,  it  is  more  difficult 
to  challenge  their  supremacy;  there  are  more  obstacles  to 
overcome,  more  pitfalls  to  encounter.  We  must  display 
greater  shrewdness  and  sagacity,  and  exercise  more  care. 
But  if  it  is  more  difficult  today  it  is  also  more  necessary. 
It  is  our  only  escape  from  a  mighty  conspiracy  and  a  con¬ 
stantly  growing  menace.  In  sheer  self  defense  the  people 
must  unite  their  strength  and  combine  their  power  to  break 
the  chains  of  their  economic  bondage.  If  they  fail  to  act 
promptly,  then  let  them  prepare  their  ankles  for  the  gyves 
of  slavery  fastened  unbreakably  to  prison  walls. 

A  Clarion  Call 

This  is  a  clarion  call  to  action!  A  call  to  quit  talking 
and  do  something.  Act  now!  or  forever  hold  your  peace. 


282 


The  New  Capitalism 


Break  the  bonds  of  economic  slavery,  while  yet  you  have 
the  strength  to  do  it. 

“Act — act  in  the  living  presence, 

Heart  within  and  God  o’erliead.” 

Delay  is  dangerous,  and  every  year  lost  will  by  that  much 
weaken  the  cause  of  the  people  and  strengthen  the  Capi¬ 
talistic  Entrepreneur  System.  I  will  not  say  that  five  or 
ten  years  hence  it  will  be  too  late,  but  I  will  say  that  unless 
resolute  action  is  taken  promptly,  more  drastic  action,  less 
gentle,  less  polite  methods,  may  be  necessary  later.  Of  one 
thing  you  may  be  sure — that  from  this  day  forward  tremen¬ 
dous  efforts  will  be  made  to  drive  a  wedge  between  the  pub¬ 
lic  and  the  laboring  classes.  No  stone  will  be  left  unturned 
in  an  endeavor  to  widen  the  rift  between  organized  Labor 
and  the  unorganized  people.  Here  lies  the  only  hope  of 
the  thoroughly  organized  Capitalistic  Entrepreneurs  to  per¬ 
petuate  and  increase  their  despotic  power  and  tyranny. 

Thus  endeth  this  chapter,  in  which  I  have  tried  merely 
to  give  the  readers  a  hurried  summary  of  the  essentials  of 
my  plan,  and  a  glimpse  of  the  possibilities  of  the  New  Capi¬ 
talism. 


CHAPTER  XXI 

Our  Principles  and  Policies 


IF  I  were  given  a  commission  to  make  this  world  over 
according  to  my  own  ideals,  or  were  asked  to  improve 
it  in  conformity  with  my  ideas,  I  would  make  few 
changes.  Certainly  there  would  be  no  upheaval.  Such 
changes  as  I  might  be  tempted  to  make  would  be  entirely 
in  individuals,  into  whose  hearts  I  would  try  to  infuse  a 
degree  of  honesty,  and  into  whose  minds  I  would  endeavor 
to  inject  a  decent  regard  for  their  followmen.  But  the 
institutions  I  would  accept  as  they  are,  leaving  them  intact, 
when  right,  and  improving  them  only  when  necessary. 

The  thing  that  most  recommends  my  plan  is  the  fact  that 
it  does  not  require  destruction  of  a  single  thing,  nor  call 
for  disturbance  of  any  kind.  We  shall  be  able  to  proceed 
without  pulling  the  1 1  established  order”  up  by  the  roots. 
Because  we  want  to  build  a  habitable  house  for  ourselves 
is  no  reason  why  we  should  raze  our  neighbor’s  cabin,  or 
his  castle,  to  the  ground.  There  are  economic  theories 
a-plenty,  each  with  a  certain  following.  There  are  so-called 
remedial  schemes  without  number,  but  each  dependent  upon 
a  radical  making  over  of  everything.  Some  sweepingly 
condemn  the  whole  economic  structure,  and  contend  that 
nothing  short  of  pulling  down  the  pillars  of  the  temple  will 
bring  relief.  These  theories  fail  to  take  into  consideration 
that  the  fabric  of  society  is  the  texture  of  civilization ;  and 
that  a  remedy  based  on  wanton  destruction,  is  no  remedy  at 
all,  and  brings  with  it  only  ruin  and  chaos. 

The  plan  I  propose  is  the  only  plan  with  specifications 
that  calls  for  action — not  destructive,  but  constructive 
action — upsetting  nothing,  destroying  nothing.  No  violence ; 
no  confiscation  of  property;  no  expropriation;  no  division 


283 


284 


The  New  Capitalism 


of  wealth ;  no  overthrowing  of  the  present  system  of  govern¬ 
ment;  no  enactment  of  new  laws  or  abrogation  of  the  old. 
Indeed  all  laws  now  on  the  statute  books  are  to  our  advan¬ 
tage,  for — note  you  well — the  Capitalistic  Entrepreneurs 
have  been  alert,  and  have  had  entered  on  the  statute  books 
of  the  nation,  hundreds  of  laws  that  are  favorable  to  them¬ 
selves,  all  of  which  can  now  be  employed  to  our  advantage 
— and  will  admirably  suit  our  purposes.  There  are  some 
things  we  shall  try  to  change  by  degrees,  and  some  that 
must  be  altered  in  due  time,  but  we  shall  proceed  in  an 
orderly  manner  and  always  within  the  sanctioned  limits  of 
the  law.  What  undoubted  wrongs  exist  we  shall  certainly 
strive  to  right,  and  we  hope  that  we  may  have  the  coopera¬ 
tion  of  all  decent  men  and  women  within  the  nation,  in  our 
endeavors. 

A  Definite  Program 

The  New  Order  must  have  a  definite  program,  based  on 
clearly  defined  fundamental  principles.  We  are  perfectly 
willing  that  the  whole  world  may  know  precisely  what  we 
stand  for,  and  what  we  will  strive  to  accomplish. 

First  of  all,  we  believe  in  a  square  deal  for  everybody. 
We  intend  to  deal  fairly  with  and  act  decently  toward 
everybody — every  set  of  interests,  every  group — whether 
entrepreneurs,  producers,  manufacturers,  wholesale  dealers, 
retail  dealers ;  and  even  essential  so-called  middlemen.  Bmt 
above  all  we  shall  insist  that  a  square  deal  and  decent  con¬ 
sideration  be  given  to  the  men  and  women  included  in  none 
of  the  above  groups, — the  farmers,  the  wage  earners,  the 
salaried  men  and  women,  and  those  not  on  any  regular 
pay-roll — in  brief,  the  non-investor  group — sometimes 
spoken  of  as  the  ultimate  consumers — the  public.  The 
Capitalistic  Entrepreneur  group  has  never  believed  in  the 
square  deal;  certainly  it  has  never  practised  it.  It  has 
never  considered  the  welfare  of  the  great  masses  of  the 
public — only  its  own  selfish  interests. 

It  is  not  our  intention  to  materially  alter  the  established 
order  of  business.  Nothing  is  more  remote  from  our  minds 


Our  Principles  and  Policies 


285 


than  to  destroy  what  is  good  and  acceptable  even  in  the 
Capitalistic  Entrepreneur  System.  We  will  protect  every 
legitimate  interest,  but  we  will  eliminate  the  false  principles 
of  exploitation.  We  will  defend  the  right  to  a  fair  profit, 
but  we  will  not  endure  the  profiteer.  We  will  support  and 
cooperate  with  every  decent  business  man,  be  he  producer, 
manufacturer  or  merchant,  or  in  whatever  legitimate  line 
he  may  be  engaged,  as  long  as  his  methods  are  honest  and 
his  aim  is  not  merely  selfish.  We  will  ascertain  whether 
all  of  the  so-called  middlemen  are  essential  to  the  proper 
and  economical  conduct  of  business.  Those  necessary  will 
be  retained;  those  unnecessary  will  be  eliminated. 

With  Regard  to  Industries 

It  will  be  our  aim  for  the  present  to  enter  into  industries 
only  to  whatever  extent  may  be  necessary  to  bring  com¬ 
modity  prices  from  their  present  altitudinous  height  down 
to  a  reasonable  level.  If  the  Capitalistic  Entrepreneurs 
show  an  earnest  willingness  to  be  decent — to  readjust  their 
wicked  System — abandon  their  unjust  methods,  lay  aside 
their  crooked  tactics  and  sinister  practices,  and  give  the 
public  a  square  deal,  that  will  be  satisfactory  to  us.  But 
we  will  not  accept  mere  promises;  we  want  performances. 
No  undue  delays  will  be  tolerated.  Procrastination  is  not 
only  the  thief  of  time;  in  this  critical  period  it  is  also  the 
thief  of  the  people’s  money — their  earnings  and  their  sav¬ 
ings.  We  will  be  fair  and  reasonable;  but  we  will  stand 
for  no  tom-foolery  nor  for  dilly-dallying.  Mammonistic 
Capitalism,  to  save  itself,  must,  willy-nilly,  become  decent 
— must  reorganize  itself  on  our  basis. 

We  do  not  propose  ever  to  act  rashly,  and  never  unfairly. 
Our  entrance  into  any  industry  will  be  prompted  by  the 
existence  of  intolerable  and  unjustifiable  conditions  in  said 
industry.  If  the  prices  of  a  product  are,  according  to  our 
way  of  computing,  unreasonably  high,  that  is  to  say,  de¬ 
monstrably  excessive  or  exorbitant — extortionate  upon  the 
consumer — we  will  call  upon  the  manufacturer  to  reduce 
them  to  decent  limits.  If  he  is  unwilling,  claiming  that  it 


286 


The  New  Capitalism 


can ’t  be  done,  or  that  he  is  producing  at  a  loss,  running  on 
a  trivial  margin  of  profit,  etc.,  we  shall  gladly  give  him  an 
opportunity  to  prove  his  case.  We  will  call  for  his  cost 
sheets — his  trial  balance — and  study  the  history  of  his  in¬ 
dustry,  examine  his  investments,  inventories,  and  whatever 
figures  and  data  he  may  have  to  substantiate  his  claim. 
You  may  rest  assured  that  all  the  evidence  will  be  critically 
analyzed,  carefully  computed,  and  fairly  judged. 

If  upon  a  thorough  investigation  it  is  disclosed  that  the 
manufacturer  is  not  at  fault — that  he  is  not  making  an 
enormous  profit  on  his  actual  investment — but  that  the 
retailer  is  guilty  of  extortion,  we  will  give  the  retailer  a 
fair  opportunity  to  adopt  reasonable  practices.  We  will 
proceed  with  him  much  as  we  shall  proceed  with  the  manu¬ 
facturer. 

The  Profiteer 

The  producer,  the  manufacturer,  the  jobber,  the  whole¬ 
saler,  and  the  retailer — each  is  entitled  to  a  profit.  We 
accept  as  an  axiom  that  profit  is  the  stimulus  to  business, 
to  progress  and  to  growth.  Without  a  fair  profit  in  pros¬ 
pect  no  man  would  care  to  go  into  business.  We  want  it 
understood  that  it  is  at  no  time  our  plan  to  destroy  profits. 
We  are  not  opposed  to  profits.  Indeed,  we  believe  in  a 
decent  profit — a  profit  large  enough  to  provide  against  any 
current  or  reasonable  future  contingencies.  But  we  oppose 
double  profits,  camouflaged  profits  and  extortionate  profits. 
We  are  determined  to  curb  and  crush  unconscionable  profi¬ 
teering — to  wipe  out  of  existence  the  tribe  of  ruthless  profi¬ 
teers.  We  will  be  fair  in  defining  what  constitutes  a  legiti¬ 
mate  and  reasonable  profit.  No  honest  producer  or  manu¬ 
facturer,  no  decent  merchant,  need  have  any  misgivings  as 
to  our  designs,  aims  or  intentions  in  this  regard.  But  the 
dishonest  producer  or  manufacturer  and  the  dishonest  mer¬ 
chant  may,  with  reason,  stand  in  fear  of  us. 

It  may  be  taken  for  granted  that  we  will  at  no  time  inter¬ 
fere  in  any  business  where  fairness  and  decency,  justice 
and  honesty,  are  in  evidence.  Certainly  we  will  never  pro- 


Our  Principles  and  Policies  287 

ceed  recklessly,  nor  without  good  and  sufficient  reasons. 
It  is  not  our  aim  to  harass  established  business  at  any 
time.  Our  object  and  purpose  is  to  create  conditions  that 
are  fair  and  decent  to  all  concerned,  to  the  producer,  the 
manufacturer,  the  retailer,  the  public,  and,  of  course,  to 
the  wage  earner — and  to  see  that  they  are  permanently 
maintained. 

No  arbitrary  stand  will  ever  be  assumed  by  us.  No  ill- 
considered  attitude  and  no  hasty  action  will  be  taken.  We 
will  move  with  caution  and  prudence,  yet  with  precision 
and  boldness.  No  step  is  to  be  taken  without  a  complete 
understanding  of  what  we  are  doing,  and  a  comprehensive 
knowledge  of  what  is  to  be  done.  In  every  case  the  officials 
of  the  New  Order  must  be  sure  of  their  ground. 

No  Miracles 

Let  it  be  clearly  understood,  the  New  Order  does  not 
pretend  that  it  will  work  miracles.  It  took  centuries  to 
bring  about  the  conditions  that  afflict  us  today ;  we  cannot 
expect  to  change  them  in  a  week.  The  evils  that  now 
characterize  the  Capitalistic  System  crept  in  little  by  little ; 
our  elimination  process  must  proceed  in  like  fashion.  The 
basic  wrongs  inherent  in  the  Capitalistic  Entrepreneur 
System — and  upon  which  it  has  builded  its  strength  and 
its  power — can,  must,  and  will  be  destroyed  by  us,  but 
gradually,  and  always  within  the  sanctioned  limits  of  the 
law. 

But  there  will  be  no  sudden  changes,  and  no  violent  up¬ 
heavals.  Living  costs  will  not  come  down  with  a  thump. 
Wages  will  not  be  immediately  increased;  such  improve¬ 
ments  as  can  be  made  with  regard  to  prices  and  wages,  will 
be  made,  but  cautiously  and  gradually.  The  Capitalistic 
System  has  declared  that  wages  cannot  be  increased,  nor 
prices  lowered ;  we  deny  the  Capitalistic  claims,  but  we  will 
find  out  for  ourselves  whether  there  is,  or  has  ever  been, 
any  justification  for  them.  Briefly,  we  do  not  propose  to 
effect  any  radical  changes  over  night,  nor  to  bring  about  a 
perfect  adjustment  of  all  problems  within  twenty-four 


288 


The  New  Capitalism 


hours.  We  will  not  enter  into  a  Marathon  race  before  we 
have  learned  to  walk.  Remember  that  the  Capitalistic  Sys¬ 
tem  arrived  slowly  and  cautiously — step  by  step,  gropingly, 
and  always  with  the  certain  knowledge  that  its  feet  were 
planted  on  firm  ground.  We  will  do  likewise.  In  this  one 
thing  at  least,  we  will  imitate  the  Capitalistic  Entrepreneur 
group. 

Stock  Exchange 

No!  my  plan  proposes  no  immediate  changes  whatever 
in  the  “existing  order,”  bad  as  that  “order”  is.  We  will 
accept  things  pretty  much  as  they  are.  Such  changes,  or 
rather  improvements,  as  may  be  deemed  necessary  or  de¬ 
sirable,  will  be  made  in  due  time  and  after  careful  analysis 
and  mature  consideration.  For  the  present,  however,  we 
will  disturb  nothing ;  not  even  that  which,  because  it  brings 
no  economic  benefit  to  the  people,  deserves  to  be  destroyed. 
For  example :  I  have  pointed  out  in  a  special  chapter,  that 
the  stock  exchanges,  while  undoubtedly  of  great  value  to 
a  few  hundred  thousand,  or  a  million,  speculators,  serve  no 
useful  purpose  as  far  as  the  general,  non-speculating,  non¬ 
investor  public  is  concerned.  They  are  not  necessary  to  the 
bona  fide  small  investor.  But  in  spite  of  all  this  we  shall 
not  aim  to  destroy  the  stock  exchanges.  No!  let  those 
who  desire  to  gamble  continue  their  gambling  operations, 
but  they  must  do  it  hereafter  with  their  own  money,  not 
with  ours.  Let  the  speculator  and  the  Capitalistic  Entre¬ 
preneurs  buy  and  sell  their  “securities”  to  each  other  if  it 
affords  them  any  pleasure — and  profit.  But  while  they  are 
having  their  fun  among  themselves  we  will  offer  the  genuine 
investor — the  man  or  woman  who  actually  desires  to  safely 
invest  a  certain  amount  of  money,  and  be  content  with  a 
fair  and  legitimate  profit, — an  opportunity  to  invest  in 
actual  properties,  in  actual  securities.  Our  stocks,  behind 
which  there  is  an  actual  but  not  an  inflated  value,  will 
always  be  worth  one  hundred  cents  on  the  dollar ;  they  will 
not  be  worth  $100  today  and  $85  tomorrow.  Our  dividends 
may  fluctuate ;  the  value  of  our  stocks  will  not  fluctuate. 


t 


Our  Principles  and  Policies 


289 


An  Apology  to  the  Small  Investor 

All  through  this  book  I  have  had  but  one  regret — viz., 
that  I  have  been  compelled  to  include  in  the  Capitalistic 
‘  ‘  investor  group  ’  ’  a  million  or  so  small  investors — men  and 
women  who  have  invested  small  sums  in  good  faith  in  some 
of  the  Capitalistic  enterprises,  and  by  so  doing  became  the  • 
prey  of  financial  pirates,  the  innocent  victims  of  bulls  and 
bears.  The  stocks  they  bought  for  a  hundred  dollars  a 
share,  today  have  a  market  value  of  perhaps  only  fifty  dol¬ 
lars — are  worth  about  fifty  cents  on  the  dollar  in  the 
market. 

Their  dividends  in  many  cases  have  been  passed  in  late 
years.  But  even  though  they  have  received  dividends  yearly, 
do  they  realize  that  the  value  (purchasing  power)  of  their 
dividends  during  the  past  twenty  years  has  been  steadily 
decreasing — that,  for  example,  a  dollar  of  dividends  in 
1920  had  a  value  (purchasing  power)  of  only  thirty-eight 
cents  compared  to  the  dollar  in  1913.  In  other  words,  if  a 
small  investor  received  $60  of  dividends  on  a  $1,000  in¬ 
vestment  in  1913,  and  $60  in  1920,  the  amount  he  received 
in  1920  had  a  purchasing  power  of  only  $22.80  as  compared 
with  the  purchasing  power  in  1913. 

A  few  corporations  have  come  to  realize  that  this  depre¬ 
ciated  purchasing  power  of  dividends  is  a  weak  link  in  the 
Capitalistic  chain,  and  are  trying  to  overcome  it  by  raising 
their  dividend  rates  from  six  to  eight  and  nine  percent. 
But  raising  the  dividend  rate  will  not  restore  the  lost  pur¬ 
chasing  power.  To  bring  the  purchasing  power  of  divi¬ 
dends  up  to  the  full  1913  strength  it  would  be  necessary  to 
raise  the  dividend  rate  from  six  percent  to  about  seventeen 
percent.  What  corporation  intends  to  do  that?  I’ll  an¬ 
swer  !  Not  one ! 

But  those  that  have  or  will  raise  their  rate  from  six  to 
eight'  or  nine  percent,  propose  to  derive  the  additional 
amount  necessary  for  the  payment  of  the  greater  dividend 
rate,  either  by  maintaining  or  raising  still  higher  the 
prices  of  their  particular  commodities.  In  other  words — 


290 


The  Sew  Capitalism 


the  stockholders  themselves  will  be  made  to  help  provide 
the  additional  revenue  that  would  enable  the  corporations 
in  which  they  are  stockholders,  to  pay  them  a  higher  divi¬ 
dend  rate. 

It  is  only  proper  that  the  “ widows  and  orphans/’  as 
well  as  the  thousands  of  employees  who  are  being  per¬ 
suaded,  inveigled  or  coerced  into  becoming  “investors”  in 
the  stocks  of  the  corporations  employing  them,  should  un¬ 
derstand  the  Capitalistic  logic  with  regard  to  the  small 
investor,  and  the  Capitalistic  arithmetic  with  regard  to 
their  investments. 

The  Small  Investor  Under  the  New  Capitalism 

To  the  bona  fide  small  investors  in  the  so-called  securities 
of  the  sundry  transportation,  industrial,  public  utilities 
corporations,  etc.,  I  want  briefly  to  emphasize  the  distinc¬ 
tive  difference  of  their  investment  under  the  Capitalistic 
inflation  System — and  under  the  system  I  propose. 

1 :  Under  my  plan  their  investment  will  always  be 
worth  one  hundred  cents  on  the  dollar.  Its  value  will  be 
permanent,  not  change  from  day  to  day,  or  hour  to  hour. 

2 :  They  will  receive,  let  us  say,  a  minimum  of  six  per¬ 
cent  on  the  par  or  permanent  value  of  their  investment 
(and  if  conditions  permit,  more  than  six  percent).  No 
bona  fide  small  investor  in  the  Capitalistic  corporations  has 
ever  received  more  than  six  percent — and  in  the  aggregate 
they  have  received  less.  The  Pennsylvania  Railroad,  for 
example,  recently  reduced  its  dividend  rate  from  six  to  four 
percent.  Many  of  the  big  corporations  passed  their  divi¬ 
dends  for  1920  and  1921  entirely. 

3  :  And  this  is  a  most  important  point !  Under  my  plan 
whatever  amount  of  dividends  an  investor  may  receive  will 
have  a  100  percent  purchasing  power;  whereas  under  the 
overcapitalization  System  the  dividends  he  is  receiving  have 
a  purchasing  power  of,  let  us  say,  50  percent.  Conse¬ 
quently,  six  percent  on  an  investment  in  our  corporations, 
will  have  as  great  a  purchasing  power  as  a  twelve  percent 
return  from  an  overcapitalized  corporation. 


Our  Principles  and  Policies 


291 


4 :  Any  dividends  which  an  investor  receives  and  saves, 
will  at  all  times  have  a  100  percent  purchasing  power. 
This  is  not  the  case  at  present.  The  dividends  an  investor 
saved  twenty  years  ago  had  a  100  percent  purchasing  power, 
but  today  he  can  buy  less  than  one-half  the  amount,  volume, 
or  quantity  he  might  have  been  able  to  buy  twenty  years 
ago. 

But  these  are  points  which  we  propose  to  discuss  more  in 
detail  once  the  New  Order  is  in  existence. 

The  Banks 

The  Sampsonian  strength  of  the  Capitalistic  Entrepre¬ 
neur  group,  the  foundation  stone  upon  which  the  Capital¬ 
istic  Entrepreneur  System  is  builded,  rests  entirely  on  its 
money  monopoly — its  absolute  and  complete  control  of  the 
nation’s  cash  resources  and  credit  facilities.  This  has  been 
stated  so  often,  and  proved  so  conclusively,  and  is  so  ob¬ 
vious,  that  I  consider  it  almost  a  waste  of  time  to  repeat  it. 

What  does  the  New  Order  propose  to  do  as  regards  the 
Capitalistic  banks?  Break  them,  destroy  them ?  No!  We 
will  let  them  alone ;  we  will  let  them  go  on  with  their  mad 
dance.  We  will  let  them  have  their  banks — and  their  Sys¬ 
tem,  to  do  with  as  they  please.  We’ll  not  touch  a  hair  of 
their  head.  But  we  will  take  precious  good  care  that  they 
shall  not,  hereafter,  touch  a  hair  of  our  head.  We  will  start 
banks  of  our  own ;  not  a  whole  string  of  them  at  once,  but 
gradually,  one  after  the  other — and  our  funds  and  credit 
facilities  will  be  used  for  our  own  benefit,  and  our  services 
placed  at  the  disposal  of  those  who  want  to  convert  their 
savings  into  real  investments.  In  brief  the  depositors  will 
own  the  banks,  and  will  derive  whatever  profit  is  to  be  de¬ 
rived,  from  the  use  of  their  savings.  We  will  not  loan  one 
dollar  of  our  money  to  any  speculator  or  for  any  specula¬ 
tive  purpose.  We’ll  help  and  cooperate  with  the  decent 
business  man — the  legitimate  business  man  ,the  farmer,  the 
home  builder.  The  promoter,  the  gambler,  the  profiteer, 
will  receive  no  help  from  us. 


292 


The  New  Capitalism 


Boards  of  Trade 

The  Board  of  Trade  is  the  twin  brother  of  the  Stock  Ex¬ 
change.  The  latter  facilitates  gambling  in  securities,  the 
former  in  farm  products  and  food  supplies.  The  same 
group  of  traders  can  be  found  in  both  pits.  Speculative 
buying  and  selling,  and  marginal  transactions,  can  be  pre¬ 
dicated  of  both  institutions. 

With  regard  to  boards  of  trade,  Senators  Kenyon  and 
Capper  have  clearly  shown  that  some  of  the  crops  of  the 
United  States  are  sold  over  from  seven  to  ten  times  in  the 
course  of  a  year.  For  whose  benefit?  The  farmers?  No! 
The  public ’s  ?  No !  For  the  undoubted  benefit  of  a  few 
thousand  speculators. 

“Years  ago,”  said  Senator  Capper,  “the  people  of  the 
United  States  demanded  the  suspension  of  the  infamous 
Louisiana  lottery.  It  is  against  the  law  to  run  a  gambling 
house  anywhere  within  the  United  States.  But  today,  un¬ 
der  the  cloak  of  business  respectability,  we  are  permitting 
the  biggest  gambling  hell  in  the  world  to  be  operated  in  the 
Chicago  Board  of  Trade.  The  grain  gamblers  have  made 
the  Exchange  building  in  Chicago  the  world’s  greatest 
gambling  house.  By  comparison,  Europe’s  suicide  club  at 
Monte  Carlo  is  as  innocent  and  innocuous  as  a  church 
bazaar.  ’  ’ 1 

Gambling,  marginal  transactions,  profit  taking — these 
are  the  sustaining  props  of  boards  of  trade.  Gambling  is 
an  ancient  sport,  and  will  probably  continue  to  the  end  of 
time.  Marginal  transactions  are  of  more  modern  origin, 
and  have  as  their  basis  the  use  of  other  people’s  money. 
We  can  refuse  to  allow  our  money  to  be  used  for  specula¬ 
tive  and  profit  taking  purposes.  If  we  cannot  stop  gam¬ 
bling,  we  may  be  able  in  course  of  time,  to  devise  ways  and 
means  by  which  the  things  gambled  in  can  be  diverted 
from  purely  speculative  institutions  to  legitimate  markets ; 
— ways  and  means  by  the  employment  of  which  the  profits 

i  From  Senator  Capper’s  Speech  at  Smith  Center,  Kansas,  October 
13.  1920. 


Our  Principles  and  Policies 


293 


will  go  to  the  actual  producers  rather  than  to  speculative 
gamblers;  and  even  enable  the  public  to  participate  in  a 
share  of  the  profits  through  the  medium  of  lower  prices. 
But  all  this  is  too  big  a  subject — too  tremendous  a  theme, 
with  too  many  ramifications  to  be  discussed  in  a  paragraph 
or  two.  Suffice  it  to  say,  for  the  present,  that  stock  ex¬ 
changes  and  boards  of  trade  will  come  under  the  studious 
scrutiny  of  the  New  Order. 

The  Fair  Purpose  of  My  Plan 

From  all  this  it  can  be  seen  that  I  am  not  proposing 
any  radical  changes  or  violent  upheaval.  Indeed,  I’ll  go 
so  far  as  to  say  that  we  do  not  want  affiliated  with  us  any¬ 
one  who  advocates  changing  the  political,  social  or  economic 
order  through  the  medium  of  violence.  Let  it  be  understood 
that  I  am  not  calling  those  who  work  for  a  wage  to  deeds 
of  vengeance.  I  am  making  no  appeal  to  their  cupidity.  I 
am  but  asking  them  to  use  their  common  sense  to  protect 
themselves  and  their  children  from  further  exploitation. 

I  uphold  the  doctrine  of  property  rights,  but  strenuously 
oppose  the  concentration  of  all  the  property  in  the  hands 
of  a  few.  I  will  at  all  times  defend  the  principle  of  the 
individual’s  right  to  hold  property;  but  at  the  same  time  I 
shall  labor  to  bring  about  a  condition  whereby  the  right 
to  have  and  to  hold  property  will  be  enjoyed  by  a  greater 
number.  The  extension  of  the  right  to  a  considerably 
greater  number  than  at  present,  and  the  actual  acquisition 
of  property  by  lawful  means,  as  well  as  the  enjoyment  of 
the  legitimate  benefits  that  accrue  to  the  possessor, — that, 
in  brief,  is  the  Alpha  and  Omega  of  the  System  of  Eco¬ 
nomics,  I  am  proposing. 

A  Question  and  an  Answer 

Can  the  New  Order  succeed?  I  answer: — Yes — beyond 
a  doubt,  for  all  the  elements  under  which  the  Capitalistic 
Entrepreneur  System  developed  itself  to  tremendous  pro¬ 
portions  will  be  in  existence  and  employed  by  us  to  the 
utmost.  We  will  have  the  capital ;  we  will  control  our  own 


294 


The  New  Capitalism 


labor ;  and  what  is  more  to  the  point,  we  will  have  the  good 
will  of  the  public  at  large  for  whose  aggregate  benefit,  rather 
than  for  the  selfish  advantage  of  any  group,  we  will  operate. 
Service  will  be  our  slogan — Service  at  as  low  a  cost  as  is 
consistent  with  business  prudence.  Service  at  a  price  that 
will  not  only  not  beggar  the  wage  earners,  but  enrich  them. 

The  Attitude  of  the  “Big  Interests ” 

I  am  going  to  pay  the  Capitalistic  Entrepreneurs  the 
compliment  of  saying  that  they  will,  discover  the  possibili¬ 
ties  of  the  New  Order  under  the  New  Capitalism  long  before 
those  most  concerned;  and  since  I  am  familiar  with  the 
tactics  of  the  “Big  Interests’ ’  I  know  to  what  extreme 
measures  they  will  be  tempted  to  resort  to  prevent  the  New 
Order  from  organizing,  and  the  New  Capitalism  from  be¬ 
coming  a  menace  to  them.  In  fact  I  have  noted  down  all 
the  things  they  will  be  likely  to  do  in  their  desperate  at¬ 
tempt  to  kill  our  child  aborning. 

When  once  my  plan  is  understood,  and  the  first  step 
toward  organizing  the  non-investor  group  has  been  taken, 
through  the  nucleus  of  organized  Labor,  you  may  rest 
assured  that  a  great  contest  of  strength  will  ensue.  The 
powers  that  be  will  launch  a  nation-wide  poison  propa¬ 
ganda,  bring  forth  their  strongest  weapons,  employ  their 
subtlest  strategy,  their  ablest  generalship,  their  most  ruth¬ 
less  tactics,  and  seek  to  win  in  the  contest  with  deadly 
gases  and  liquid  flames  of  fire.  Through  their  banks  they 
will  attempt  to  checkmate  our  every  move,  to  strangle  us 
— to  throttle  us.  But  let  them  try.  They  will  find  us  pre¬ 
pared  to  counter  their  every  stroke,  to  checkmate  their 
every  move. 

Not  until  we  are  molested  will  we  show  our  teeth,  and 
even  bite  if  it  is  necessary;  not  until  we  are  attacked  will 
we  strike  back;  not  until  we  are  threatened  with  violence 
will  we  fight,  and  then  to  the  death.  We  serve  notice  right 
now  that  we  will  not  offer  the  right  cheek  when  our  left  is 
smitten.  We  shall  practice  patience,  but  leave  humility  to 
the  saints. 


CHAPTER  XXII 

Who  Is  “ The  Public”? 


BUT  before  organized  Labor  can  attempt  to  inaugurate 
a  New  Order,  it  will  have  to  take  an  inventory  of 
itself.  It  behooves  me,  therefore,  to  emphasize  the 
two  false  bases  upon  which  organized  Labor  has  been  build¬ 
ing  its  organization  to  date.  It  is  because  organized  Labor 
did  not  discover  that  the  bases  were  false  that  its  super¬ 
structure  is  toppling  over.  I  mean  Labor’s  wrong  attitude 
toward  the  public,  and  its  false  concept  as  regards  wages. 
If  what  I  shall  write  in  this  chapter,  and  the  chapters  deal¬ 
ing  with  wages,  will  help  to  clarify  views;  if  organized 
Labor  will  grasp  the  full  import  of  these  two  basic  subjects ; 
if  seeing  the  error  of  its  way  in  the  past  it  can  persuade 
itself  henceforth  to  a  clearer  vision  of  its  status  and  true 
relationship  to  those  not  of  its  fold,  much  will  have  been 
accomplished.  A  good  beginning  will  have  been  made. 

You  may  have  noticed  within  recent  years,  in  the  daily 
press,  financial  papers,  trade  journals,  manufacturers’  offi¬ 
cial  organs,  and  commercial  publications  of  all  kinds,  one 
of  the  most  effective  slogans  in  the  Capitalistic  category — 
viz.,  that  nothing  must  be  done,  or  even  tolerated,  that  is 
detrimental  to  society — to  the  community,  or  the  public. 
How  tenderly  solicitious  these  Capitalistic  spokesmen  have 
suddenly  become  of  society;  how  graciously  considerate  of 
the  community;  and  what  wonderful  champions  of  the 
general  public.  The  assumption  is,  of  course,  that  the  Capi¬ 
talistic  group  has  never  in  all  its  history  done  anything 
that  was  not,  ever  and  always,  for  the  immediate  welfare  of 
society,  and  for  the  best  interests  of  the  community,  and 
invariably  for  the  good  of  the  public.  While  the  inference 
and  the  open  charge  is  that  every  attempt  that  Labor  makes 
to  better  its  condition  is  a  distinct  slap  in  the  face  of  the 


295 


296 


The  New  Capitalism 


public — an  offense  against  the  community — an  attack 
against  the  very  pillars  of  society. 

Let  me  briefly  examine  this  new  slogan,  and  lay  bare  its 
arrant  knavery — its  camouflaged  hypocrisy.  To  the  propo¬ 
sition  that  neither  organized  Capital  nor  organized  Labor 
has  a  right  to  do  aught  that  is  detrimental  to  society,  or 
an  injustice  to  the  community,  or  an  attack  on  the  public, 
I  give  heartiest  assent.  And  then  I  assert  that  everything 
that  the  Capitalistic  group  has  done  from  its  very  inception 
has  been  diametrically  opposed  to  the  best  interests  of  so¬ 
ciety — of  the  community  and  the  general  public.  That  this 
is  more  than  an  assertion  I  hope  at  least  some  of  the  chap¬ 
ters  of  this  volume  will  partially  show.  But  lest  some  eco¬ 
nomic  wiseacre,  or  offended  Mammonist,  take  issue  with  me 
on  this  score,  I  challenge  him  to  disprove  my  claim  that 
the  whole  Capitalistic  System,  and  all  its  operations,  are 
specifically  for  the  benefit  of  a  comparatively  small  group. 
I  challenge  him  to  deny  that  the  public  actually  pays  the 
dividends  on  the  inflated  valuation  of  the  overcapitalized 
corporations,  and  interest  on  all  the  inflated  “values”  of 
productive  properties.  I  challenge  him  to  prove  that  the 
public  is  directly  benefited  by  the  Stock  Exchange  transac¬ 
tions.  I  promise  him  that  I  will  be  largely  attentive  while 
he  categorically  enumerates  the  blessings  showered  upon 
the  public  by  selling  the  grain  crops  of  the  United  States 
over  several  times  a  year.  I  am  willing  to  be  silent  while 
he  demonstrates,  arithmetically  or  otherwise,  just  how  the 
general  public  is  the  beneficiary  of  the  system  of  overcapi¬ 
talization  and  inflation. 

If  any  organized  institution  is  to  be  criticised,  or  con¬ 
demned,  or  destroyed,  because  it  is  injurious  to  the  best 
interests  of  society — harmful  to  the  community — and  brutal 
to  the  general  public — that  institution  is  the  Capitalistic 
Entrepreneur  System. 

“The  Party  of  the  Third  Part” 

But  there  is  another  and  a  more  insistent  side  to  this 
question,  a  brief  discussion  of  which  seems  to  me  entirely 


Who  Is  “The  Public”? 


297 


in  order  here.  Who  is  the  general  public,  which  it  pleased 
Governor  Allen  of  Kansas)  et  id  genus ,  to  dub  “the  Party 
of  the  Third  Part”?  How  is  this  “Party  of  the  Third 
Part”  constituted?  Who  composes  it?  The  country 
is  made  up  of  twenty  percent  of  investors,  and  eighty  per¬ 
cent  of  non-investors.  Consequently  the  public  is  composed 
of  twenty  percent  of  Capitalistic  “investors”  and  eighty 
percent  of  non-investors — of  wage  earners  and  salaried  men 
and  women.  If,  then,  any  group  of  wage  earners,  or 
salaried  men  and  women  in  their  role  of  workers,  seek  to 
protect  or  defend  themselves,  or  deem  it  necessary  in  order 
to  vindicate  a  fundamental  principle,  to  resist,  to  strike,  let 
us  say,  and  thereby  cause  temporary  inconvenience  or  even 
suffering  to  the  public,  they  are  inflicting  inconvenience 
and  suffering  principally  upon  themselves.  I  rather  sus¬ 
pect  that  the  part  of  the  public  that  protests  is  chiefly  the 
twenty  percent  of  Capitalistic  “investors” — beneficiaries 
of  the  Capitalistic  System,  which  in  every  instance  is  re¬ 
sponsible  for  strikes  and  miscellaneous  disturbances.  Let 
us  have  no  further  nonsense  about  the  wrong  that  Labor, 
in  a  struggle  or  death  grapple,  inflicts  upon  the  public — 
that  is — principally  on  itself. 

Strabismus 

Now  the  surprising  thing  is  that  organized  Labor,  or 
more  correctly  speaking  some  of  its  leaders  and  spokesmen, 
do  not  seem  to  have  realized  this  fact.  They  speak  and  act 
as  if  there  were  indeed  “a  Party  of  the  Third  Part” — a 
portion  of  the  population  that  belongs  neither  to  the  inves¬ 
tor  nor  to  the  non-investor  group — that  stands  between 
Capital  and  Labor — a  sort  of  innocent  bystander,  and  help¬ 
less  victim  of  the  multitudinous  quarrels  and  fights  between 
the  Capitalistic  group  and  the  wage  earner  group. 

In  its  preliminary  report  the  Convention  Committee  on 
Social  Service  declared :  ‘  ‘  The  problem  of  Labor  and  Capi¬ 
tal  is  no  longer  one  which  concerns  only,  or  even  mainly, 
these  two  essential  parties  to  production.  As  never  before 
it  is  a  community  problem,  a  national  problem,  and  an  in- 


298 


The  New  Capitalism 


ternational  problem — in  a  word,  the  problem  of  humanity. 

Frank  Morrison,  Secretary  of  the  American  Federation 
of  Labor,  in  answer  to  a  request  for  an  opinion  on  the  pre¬ 
liminary  report,  seized  upon  this  declaration,  and  in  the 
course  of  his  analysis  combated  the  theory  that  the  commu¬ 
nity — i.  e.  the  public — is  a  party  to  and  therefore  con¬ 
cerned  in  any  dispute  between  laborers  and  Capitalists.  He 
maintains  in  substance,  that  the  public  has  no  interest  in 
the  laborer — that  its  interest  is  confined  to  the  commodities 
laborers  produce.  This,  however,  he  maintains,  does  not 
make  the  public  a  party  to  industrial  relations. 

If  the  public  took  an  interest  in  and  concerned  itself  with 
the  economic  welfare  of  the  workers  Mr.  Morrison  would 
probably  concede  the  public’s  concern  in  Labor  disputes. 
“I  believe,”  said  Mr.  Morrison,  “a  fair  statement  of  the 
case  is  that  the  community’s  interest  in  the  worker  is 
founded  upon  its  one  desire  for  the  worker’s  commodities, 
and  not  upon  any  belief  in  the  right  of  the  worker ;  its  con¬ 
cern  is  not  with  the  wages  paid  to  the  workers,  or  the  con¬ 
ditions  under  which  they  work,  but  rather  with  the  con¬ 
tinuous  operation  of  industry,  so  that  its  wants  may  be 
supplied  without  interruption.  After  these  wants  have 
been  supplied  it  is  a  matter  of  no  concern  to  the  commu¬ 
nity  what  becomes  of  the  worker.  ’  ’ 1 

Mr.  Morrison  substantially  argues  that  if  the  public  mani¬ 
fests  no  interest  in  the  condition  of  those  who  labor,  nor 
evinces  any  concern  whether  the  wages  paid  them  are  suf¬ 
ficient  to  enable  them  to  live  in  frugal  comfort  and  decency, 
then  the  public  has  no  right  to  consider  itself  an  injured 
party  when  Labor  finds  it  necessary,  either  in  order  to 
secure  better  wages,  or  living  or  working  conditions,  to  tem¬ 
porarily  cease  its  operations. 

I  have  no  desire  to  enter  into  a  discussion  of  Mr.  Mor¬ 
rison’s  views  here  summarized.  While  discerning  a  meas¬ 
ure  of  plausibility  in  his  logic  I  question  the  wisdom  of  his 
stand  or  contentions.  I  do  not  blame  him  for  viewing  the 


i  The  National  Labor  Digest,  August,  1920. 


Who  Is  “The  Public”? 


299 


question  purely  from  the  worker ’s  standpoint,  particularly 
since  without  the  use  of  their  most  effective  weapon — the 
strike — (and  strikes  frequently  mean  a  temporary  incon¬ 
venience  to  the  1 ‘  public  ’  ’ )  the  condition  of  those  who  labor 
would  be  what  it  was  fifty  years  ago;  nay,  worse,  in  that 
no  improvement  whatever  in  their  condition,  working  or 
living,  would  have  been  made. 

When  Capital  Goes  on  Strike 

Mr.  Morrison  might  easily  have  strenghtened  his  argu¬ 
ment  by  asking :  What  interest  does  the  public  evince  in 
those  who  labor  when  Capital  sees  fit  to  strike  (as  was  the 
case  for  more  than  two  years  after  the  war  and  as  a  result 
of  which  between  four  and  five  million  men  and  women 
were  thrown  out  of  work).  Capital's  most  recent  and  pro¬ 
longed  strike  was  not  only  a  temporary  inconvenience  but 
a  prolonged  hardship,  and  an  irreparable  injury  to  the 
four  or  five  million  families  of  men  and  women  who  were  out 
of  work,  or  working  only  part  time.  Did  the  public  pro¬ 
test?  Did  the  public  take  a  single  step  to  end  the  incon¬ 
venience  and  hardships  to  which  the  four  or  five  million 
men  and  women  and  their  families  were  subjected?  Did 
it  make  a  single  move  to  alleviate  the  suffering  that  Capi¬ 
tal’s  strike  had  imposed?  Has  it  concerned  itself  with  the 
money  losses  of  the  four  or  five  million ;  or  is  it  particularly 
disconcerted  by  the  reflection  that  most,  if  not  all,  of  them, 
consumed  their  scant  savings,  while  many  were  hurled  into 
debt? 

Two  Sides  to  the  Question 

Even  those  not  ordinarily  disposed  to  favor  those  who 
work  for  a  wage  will  have  to  admit  that  there  are  two  sides 
to  the  question,  and  that  Mr.  Morrison  and  others  who  have 
upon  occasion  taken  the  stand  that  the  public,  which  is  not 
vitally  interested  in  those  who  labor,  has  no  right  to  feel 
aggrieved  when  those  who  labor  find  it  necessary  in  order 
to  obtain  a  decent  wage,  or  to  improve  their  condition,  occa¬ 
sionally  to  inconvenience  the  community.  In  view  of  the 


300 


The  New  Capitalism 


obvious  fact  that  the  public  gives  scant  consideration  to 
those  who  labor  at  any  time,  and  no  consideration  at  all 
when  wage  earners  are  in  trouble,  it  is  not  difficult  to 
understand  the  occasional  tone  of  bitterness  one  discerns  in 
the  writings  and  utterances  of  Labor  leaders.  One  cannot 
blame  them  when  they  ask  at  least  inf erentially : — ‘ 1  What 
has  the  public  ever  done  for  us  ?  What  consideration  does 
the  public  give  us;  what  interest  in  our  welfare  does  the 
public  take;  what  gratitude  does  it  show  for  the  personal 
sacrifice  we  have  made  and  as  a  result  of  which  this  very 
public  is  now  enjoying  a  better  standard  of  living  than 
Capital  was  willing  to  concede  to  it?  If  the  general  public 
is  better  off  than  it  ever  was ;  if  it  has  improved  its  general 
condition,  is  it  not  largely  owing  to  the  fact  that  we  fought 
the  public ’s  fight — incurring  loss  of  wages  and  savings,  and 
even  jeopardizing  our  freedom  and  our  lives — when  we  in¬ 
sisted  on  better  wages  and  better  working  conditions,  more 
reasonable  hours,  etc.,  of  all  of  which  things  the  public  is 
and  has  been  the  beneficiary  ?  ’  ’ 

W diking  Into  the  Trap 

To  all  of  which  argumentation  any  fair-minded  person 
can  easily  subscribe.  Nevertheless,  and  in  spite  of  all  this, 
I  consider  it  unwise  on  the  part  of  Labor  leaders  and 
spokesmen  to  indulge  in  harsh  utterances  as  regards  the 
public,  particularly  since  it  is  the  apparent  design  of  the 
Capitalistic  group  to  spread  the  idea  that  organized  Labor 
is  opposed  to  the  public ;  that  it  considers  its  own  interests 
superior  to  the  interests  of  the  public ; — in  brief  that  what¬ 
ever  is  to  the  interest  of  organized  Labor  is  necessarily  op¬ 
posed  to  the  public  interest  and  detrimental  to  the  public ’s 
welfare. 

Readers  will  recall  the  Allen-Gompers  debate,  in  the 
course  of  which  Governor  Allen  asked  Mr.  Gompers  the 
following  question : 

1 1  When  a  dispute  between  capital  and  labor  brings  on  a 
strike  affecting  the  production  or  distribution  of  the  neces¬ 
saries  of  life,  thus  threatening  the  public  peace  and  impair- 


Who  Is  “The  Public”? 


301 


ing  the  public  health,  has  the  public  any  rights  in  such  a 
controversy,  or  is  it  a  private  war  between  capital  and 
labor?  If  you  answer  this  question  in  the  affirmative,  Mr. 
Gompers,  how  would  you  protect  the  rights  of  the  public  ?  ’  ’ 

The  circular  announcing  the  publication  of  Governor 
Allen’s  book,  entitled  “The  Party  of  the  Third  Part,”  com¬ 
pares  the  question  Governor  Allen  asked  Mr.  Gompers  to 
the  question  Lincoln  addressed  to  Douglas  in  their  famous 
debate ;  and  adds  that  no  matter  whichever  way  Mr.  Gom¬ 
pers  might  answer,  it  would  ruin  him. 2 

I  am  not  concerned  with  the  Allen-Gompers  debate  or 
controversy.  I  wish  merely  to  emphasize  the  admitted  de¬ 
sign  of  Governor  Allen  to  ruin  Mr.  Gompers,  i.  e.,  to  dis¬ 
credit  organized  Labor  in  the  eyes  of  the  public;  and  to 
add  that  when  the  leaders  and  spokesmen  of  organized 
Labor  go  on  record  with  statements  which,  to  say  the  least, 
are  ungracious,  they  are  walking  with  both  feet  into  a 
cleverly  concealed  steel  trap  laid  by  organized  Capital. 
Or  to  vary  the  figure  somewhat,  they  are  furnishing  the 
powder  for  the  Capitalistic  guns. 

The  Change  in  Public  Sentiment 

1  doubt  whether  the  public,  in  the  mass,  cherishes  any 
serious  resentment  against  organized  Labor  on  account  of 
an  occasional  inconvenience,  or  even  temporary  hardships, 
resulting  from  a  strike  either  for  better  wages  or  better 
working  conditions,  for,  be  it  remembered  that  the  general 
public  is  principally  composed  of  men  and  women  who 
work  for  a  wage  or  salary,  although  most  of  them  are  not 
organized,  and  do  not  belong  to  any  Labor  union.  In  a 
general  way,  then,  I  would  say  that  the  public  \s  sympathy 
is  with  organized  Labor,  or  at  least  has  been  up  to  within 
recent  years.  If  there  has  been  any  change  in  the  public’s 
sentiment  or  attitude  it  is  not  on  account  of  any  temporary 
inconvenience  resulting  from  an  occasional  cessation  of 
work  on  the  part  of  organized  Labor,  but  rather  for  an 

2  According-  to  the  same  circular  Mr.  Gompers  did  not  answer  the 
question,  but  later  he  issued  a  statement. 


302 


The  New  Capitalism 


entirely  different  set  of  reasons.  The  public — and  I  speak 
more  particularly  of  the  millions  of  unorganized  men  and 
women  who,  like  those  who  are  organized,  work  for  a  mere 
living  wage  or  salary — has  observed  for  some  years  now 
that  certain  organized  Labor  unions  have  used  their  organ¬ 
ized  strength  and  power  selfishly,  and  ruthlessly,  utterly 
disregarding  the  rights  or  welfare  of  everyone  else. 

For  example,  in  1919  there  was  a  strike  of  the  Chicago 
street  railway  motermen  and  conductors,  and  traffic  was 
tied  up.  After  a  few  days  the  not  unreasonable  demands 
for  an  increase  in  the  wages  of  street  railway  employees 
were  granted.  But  this  increase  in  the  wages  of  railway 
employees  was  made  the  excuse  for  a  further  increase  in 
fares.  Formerly  the  car  fare  was  five  cents;  now  it  is 
eight  and  ten  cents.  This  means  that  every  man  and  woman 
who  works,  and  who  uses  the  street  cars,  surface  or  elevated, 
going  to  and  coming  from  work,  must  now  pay  six  or  seven 
cents  a  day  more  than  formerly — or  about  twenty  dollars  a 
year. 3 

It  is  generally  believed  that  the  surface  and  elevated  lines 
gained  more  from  this  increase  in  fare  than  the  railway 
employees. 

In  like  fashion  the  milk  wagon  drivers’  strike,  conducted 
about  the  same  time  and  supposedly  under  similar  auspices 
and  with  the  same  results  to  the  general  public — viz.,  that 
the  average  family  was  compelled  to  pay  considerably  more 
for  its  milk,  cream  and  other  dairy  products.  It  has  been 
computed  that  of  the  total  amount  of  the  increase  only 
about  45  percent  went  to  the  drivers  and  other  employees, 
and  55  percent  to  the  operators. 

These  are  only  two  instances,  in  a  single  city,  of  hundreds 
that  could  be  cited,  to  show  how  isolated  groups  of  Labor 
unions  in  all  parts  of  the  United  States,  have  been  instru- 

3  In  June,  1922,  the  fare  on  the  Chicago  surface  lines  was  reduced 
by  order  of  the  Court,  to  seven  cents.  The  railway  company  promptly 
announced  that  the  seven  cent  fare  would  result  in  a  reduction  of 
$9,000,000.  On  July  3,  we  read  in  the  Chicago  Daily  News :  "The 
11,000  motormen  and  conductors  on  the  Chicago  Surface  Lines  will  be 
asked  tonight  to  take  a  wage  reduction  of  25  percent,  or  thirty  cents 
an  hour,  from  the  present  scale  of  eighty  cents.” 


Who  Is  “The  Public ”? 


303 


mental  in  burdening  the  general  public  with  a  considerable 
aggregate  increase  in  their  living  expenses.  The  recent 
revelations  with  regard  to  hundreds  of  engineered  strikes, 
generally  instituted  by  so-called  ‘  ‘  business  agents  ’  ’  of  Labor 
organizations  for  their  own  private  benefit  and  gain,  all 
of  which  are  to  a  certain  extent  responsible  for  considerable 
increases  in  the  rent  item  of  families,  to  say  nothing  of  ad¬ 
ditional  increases  in  the  prices  of  commodities  manufac¬ 
tured  or  sold  in  buildings  affected  by  such  “hold  up” 
strikes,  have  accentuated  the  bitterness  that  the  general 
public  is  beginning  to  feel  toward  Labor,  particularly 
organized  Labor. 

The  Press  “ Tells  the  World ” 

The  daily  press  is  not  allowing  any  opportunity  of  giving 
full  publicity  to  every  offense  of  this  nature  to  escape. 
Thus  we  read  in  the^hicago  Daily  News  (July  16,  1921)  : 

“Assistant  State’s  Attorney  E.  Stanley  Hodges  an¬ 
nounced  that  an  investigation  of  alleged  interference  with 
the  milk  supply,  said  to  have  been  practised  by  milk  wagon 
drivers,  would  be  started  in  the  near  future. 

“  ‘I  have  summoned  the  officials  of  the  Milk  Wagon 
Drivers’  union  for  questioning,’  said  Mr.  Hodges,  ‘and 
if  the  evidence  bears  out  the  charges  made  to  the  office 
we  will  go  before  the  grand  jury  asking  for  indictments. 

“  ‘The  complaints,  most  of  which  have  come  from  Chi¬ 
cago  housewives,  charge  that  there  is  an  agreement  among 
the  drivers  that  dealers  cannot  be  changed — that  if  a  cus¬ 
tomer  wishes  to  buy  from  other  milk  dealers  he  or  she  is 
informed  that  it  is  against  the  rules  of  the  union.  In  some 
instances,  it  is  alleged,  the  milk  supply  has  been  cut  off  and 
the  customer  forced  to  walk  to  stores  for  it. 

“  ‘If  there  is  really  an  interference  of  this  sort  we  will 
stop  it',’  said  Mr.  Hodges.  ‘It  is  criminal  to  tamper 
with  the  milk  supply  during  hot  weather.  In  the  case  of 
families  with  babies  it  may  result  in  death,  and  in  that 
case  we  would  be  justified  in  holding  the  boycotting  driver 
for  manslaughter.’  ” 


304 


The  New  Capitalism 


This  is  only  one  of  many  similar  cases  that  have  been 
brought  to  the  attention  of  the  public  within  recent  years. 
Hundreds  could  be  cited  in  any  big  city,  and  thousands  in 
the  United  States.  It  is  not  at  all  singular  that  the  irrita¬ 
ting  frequency  of  their  occurrence  has  produced  changes  in 
the  public  mind  and  attitude  in  spite  of  the  fact  that  a 
considerable  portion  of  the  public  is  composed  of  men  and 
women  who  work  for  a  wage  or  salary,  or  a  recompense  the 
equivalent  of  a  wage.  Moreover  there  is  hardly  a  family 
that  has  not  at  some  time  or  other,  been  the  victim  of  some 
of  the  hundred  and  one  restrictive  rules  and  arbitrary 
regulations  which  Labor  unions  seem  to  insist  upon,  under 
the  mistaken  impression  that  they  are  necessary  for  La¬ 
bor’s  protection  and  well  being,  and  the  strict  observance 
of  which  generally  means  annoyance,  discomfort,  and  ex¬ 
pense,  to  all  not  belonging  to  a  Labor  organization. 

When  organized  Labor  employs  high-handed  tactics  it  is 
playing  a  losing  hand.  But  when  organized  Labor  allows 
itself  to  be  betrayed  into  an  attitude  of  seeming  hostility 
to  the  public,  through  ill-advised  or  intemperate  utterances 
of  its  leaders  and  spokesmen,  it  is  guilty  not  only  of  blun¬ 
dering  but  of  folly. 

A  Study  in  Contrasts 

Why  cannot  organized  Labor  learn  a  lesson  from  organ¬ 
ized  Capital?  Take,  for  example,  the  following  statement 
made  by  Richard  S.  Hawes,  in  his  address  as  President  of 
the  American  Bankers  Association  (October  19,  1920)  : 

“  Three  factors  are  concerned  in  all  these  misunder¬ 
standings  (between  Capital  and  Labor)  :  labor  leaders,  in¬ 
dustrial  leaders,  and  the  more  often  disregarded  public. 
The  latter’s  interests  usually  suffer  most,  because  of  the 
rules  under  which  the  contest  is  held.  The  welfare  of  the 
general  public  is  most  important.  In  the  settlement  of  dis¬ 
putes,  consideration  should  be  given  to  the  effect  upon  the 
public,  and  full  responsibility  placed.” 

Or  listen  to  this  cooing  statement  made  by  that  great 
humanitarian,  Elbert  H.  Gary,  who  for  years  has  been 


Who  Is  “The  Public”? 


305 


the  valiant  protector  of  the  “rights”  of  his  employees  to 
work  twelve  hours  a  day  and  seven  days  a  week,  and  whose 
whole  career  has  been  one  prolonged  act  of  affectionate 
consideration  for  the  public,  and  loving  regard  for  the 
public  welfare : 

“It  will  cheerfully  be  admitted  that  the  interests  of  the 
general  public,  so-called,  are  first  to  be  considered.  When 
they  clash  with  private  interests,  the  latter  must  be  sub¬ 
ordinated.  On  this  principle  our  Government  is  founded. 
It  is  essential  to  the  protection  and  happiness  of  all  the 
people,”  etc.4 

Compare  the  foregoing  statements  (Mr.  Hawes’  and  Mr. 
Gary’s)  of  tender  solicitude  for  the  public,  with  the 
brusque  and  caustic  declaration  by  a  representative  of 
organized  Labor.  At  the  hearing  5  before  a  subcommittee 
of  the  Committee  of  Interstate  Commerce  on  the  Poindexter 
Anti-Strike  Bill  S.  4204  (Senator  Poindexter  presiding), 
Henry  Sterling,  Legislative  Representative  of  the  Ameri¬ 
can  Federation  of  Labor  entered  a  protest  against  the 
Poindexter  bill.  In  the  course  of  his  statement  Mr.  Sterling 
said : 

‘ 1  The  chief  reason  alleged  for  the  enactment  of  the  anti¬ 
strike  legislation  is  the  convenience  of  the  public.  The 
public  must  not  be  inconvenienced.  The  public  must  have 
everything  come  its  way,  just  as  it  should  come;  but  did  it 
ever  occur  to  you,  Senator,  that  the  public  does  not  give  a 
damn  for  the  man  who  works  ?  Unless  he  kicks  and  squirms 
and  stops  working  he  never  gets  a  remedy  for  anything. 

‘  ‘  The  public  is  like  the  priest  and  the  Levite  that  passed 
over  on  the  other  side.  The  public  is  the  one  great  sinner 
in  the  industrial  field.  The  public  makes  all  its  conditions 
and  controls  them.  It  is  not  alone  that  the  public  is  indif¬ 
ferent  ;  it  is  positively  criminal  in  its  indifference  at  times. 

9 

The  children  in  the  mills  in  the  South  might  work  them- 


4  “Principles  and  Policies  of  the  United  States  Steel  Corporation.” 
Statement  fay  Ellbert  H.  Gary,  Chairman,  at  the  Annual  Meeting-  of 
the  Stockholders,  April  18,  1921. 

5  May  20,  1920. 


306 


The  New  Capitalism 


selves  to  death  and  the  public  would  not  care.  It  is  only 
when  the  agitator  comes  along  and  points  out  what  is  the 
offense  to  the  public  conscience.  They  never  will  notice  it 
unless  it  is  pointed  out.  The  only  wrong  done  in  the  indus¬ 
trial  conflict  is  to  the  so-called  innocent  third  party,  and  as 
soon  as  we  who  work  for  a  living  take  some  effective  meas¬ 
ures  for  our  own  welfare,  then  you  want  to  put  us  in  jail.” 

It  is  only  fair  to  say  in  extenuation  that  ‘  ‘  the  convenience 
of  the  public”  was  given  as  the  chief  reason  for  the  pro¬ 
posed  anti-strike  legislation ;  and  it  was  by  way  of  answer¬ 
ing  the  “reason  alleged”  that  Mr.  Sterling  delivered  him¬ 
self  as  quoted.  Nevertheless  such  statements  are  illumina¬ 
ting,  in  that  they  clearly  show  a  confused  state  of  mind. 

Confusion  Everywhere 

There  are  two  things  I  charge  against  organized  Labor 
as  regards  its  crudely  stated  animadversions  on  the  public. 

i First,  that  it  is  utterly  lacking  in  tact : 

Secondly ,  that  it  has  no  clearly  defined  idea  as  to  who 
constitutes  the  public. 

The  first  charge  I  have  sufficiently  established  in  this 
chapter.  But,  as  regards  the  second,  I  desire  to  urge  a  few 
palliating  circumstances.  Organized  Labor  is  not  alone  in 
its  confused  notions  regarding  the  constituency  of  the  pub¬ 
lic.  The  press  of  the  land,  and  men  holding  high  official 
positions,  cannot  be  credited  with  any  greater  degree  of 
clarity  than  organized  Labor.  You  .will  recall,  perhaps, 
that  in  1919  the  Chief  Executive  of  the  nation,  Woodr6vV 
Wilson,  called  an  Industrial  Conference  at  which  Capital, 
Labor  and  the  Public  were  to  be  represented.  Now  glance 
at  this  list  of  the  fifteen  men  who  were  invited  by  Mr.  Wil¬ 
son  to  represent  the  'public: 

“Among  those  invited  and  specially  designated 
to  ‘represent  the  Public  Interest’  in  this  Confer¬ 
ence,  behold  Rockefeller  (Standard  Oil)';  Gary 
(Steel  Trust)  ;  Brookings  (Union  Trust  Co.)  ; 
Chadbourne  (Railroads) ;  Dawes  (Central  Trust 
Co.)  ;  Burgess  (National  Banks)  ;  Gallaway  (Cot- 


Who  Is  “The  Public”? 


307 


ton  Trust) ;  Endicott  (United  Shoe  Machinery, 
Smelting  Trust,  etc.,  etc.)  ;  Feiss  (Clothing 
Trust)  ;  Gay  (Editor,  Morgan  owned  Paper)  ; 
James  (Manufactures  and  Banks)  ;  Jones  (N.  J. 

Zinc  Trust)  ;  Landon  (American  Radiator  Trust)  ; 
Meredith  (U.  S.  Chamber  of  Commerce)  ;  McNabb 
(Known  in  San  Francisco  as  ‘McScab’)  ;  Sweet 
(Beet  Sugar);  Titus  (Oil).”6 

Surely  there  is  none  to  assert  that  these  men  are  truly 
representative  of  the  public,  or  deny  that  all  of  them  fitted 
more  appropriately  into  the  Capitalistic  group.  In  reality, 
in  the  so-called  Industrial  Conference,  Labor  had  two  dis¬ 
tinctly  segregated  Capitalistic  groups  arrayed  against  it — 
one  admittedly  and  distinctively  Capitalistic,  the  other  also 
Capitalistic  but  masquerading  as  the  public  group.  If  then, 
Labor — more  particularly  organized  Labor — owing  to  the 
great  confusion  as  to  who’s  who,  has  blundered  in  tactics 
and  in  language  against  the  public,  its  mistakes  can  be  ex¬ 
plained  as  well  as  condoned. 

With  Regard  to  the  Future 

But  if  there  has  been  confusion  in  the  past  there  is  no 
excuse  for  its  continuance  in  the  future.  The  new  economic 
division  clearly  draws  the  line.  The  public  is  composed  of 
all  the  people — divided  into  twenty  percent  investors  and 
eighty  percent  non-investors.  In  the  latter  group  we  find 
jiractically  all  those  who  work  for  a  wage ;  some  are  organ¬ 
ized,  some  are  not.  Organized  Labor  is  in  the  non-investor 
group.  Since  the  interests  of  organized  Labor  are  identical 
with  the  interests  of  all  non-investors,  it  is  the  height  of 
folly  for  organized  Labor  to  proceed  as  if  it  were  not  a 
component  part  of  the  non-investor  group — composed  of 
eighty  percent  of  the  population,  i.  e.,  of  the  general  public. 
Consequently  any  move  or  step,  any  action  or  word  on  the 
part  of  the  leaders  or  officials  or  representatives  of  the 
organized  portion  of  the  public,  that  alienates  the  sympathy 


6  La  Follette’s  Magazine,  October,  1918. 


308 


The  New  Capitalism 


and  moral  support  of  those  not  organized,  is  the  acme  of 
folly.  Let  organized  Labor  ponder  over  this  truth  before 
it  is  too  late,  and  mend  its  ways. 

Labor’s  True  Strength 

The  greatest  strength  of  organized  Labor  is  found — not 
within  its  own  ranks — not  among  its  necessarily  limited 
membership,  but  in  the  sympathy  and  moral  support  of 
that  portion  of  the  public  having  no  investments,  and  whose 
income  is  derived  from  wages  and  salaries.  There,  I  say  to 
organized  Labor,  lies  your  true  strength.  These  approxi¬ 
mately  eighty  percent  of  the  population,  are  your  sustain¬ 
ing  props.  True,  it  is  an  unorganized  strength,  an  unas¬ 
sembled  power,  an  undirected  influence — but  it  is  up  to  you 
to  organize  and  assemble  and  to  direct  its  support  in  your 
favor — not  against  you. 

Remember  that  you  have  no  press  that  reaches  all  the 
people;  your  official  organs  do  not  fall  under  the  public 
eye.  Remember  that  there  are  millions  not  actively  affi¬ 
liated  with  you  who  derive  their  information  about  you 
from  an  unsympathetic  daily  press.  Remember  that  a  ma¬ 
jority  of  the  population  gets  its  slant  or  bias  concerning 
your  virtues  or  your  iniquities  from  the  papers  or  periodi¬ 
cals  it  reads.  Avoid  narrowness  and  selfishness.  There  is 
nothing  more  fatal  to  your  aspirations  than  the  attitude 
“organized  Labor  for  itself,  and  may  the  devil  take  the 
hindmost” — a  sort  of  “public  be  damned”  policy. 

Protect  the  eighty  million — (of  which  you  are  a  con¬ 
siderable  part).  Do  not  segregate  yourself;  do  not  strive 
only  to  protect  yourself,  and  let  everybody  else  not  belong¬ 
ing  to  your  particular  organization  go  hang.  That  is  an 
unwise  attitude,  a  foolish  policy — a  suicidal  procedure. 
Protect  the  eighty  million  and  the  eighty  million  will  sup¬ 
port  you.  Above  all,  put  your  house  in  order. 


CHAPTER  XXIII 
The  Science  of  Wages 


POLITICAL  economists  are  fond  of  smothering  burn¬ 
ing  questions  in  a  wet  blanket  of  quasi-technical  verbi¬ 
age.  Thus,  for  example,  in  every  treatise  on  Political 
Economy,  lengthy  chapters  appear  on  “Wages.”  We  are 
told,  with  many  fine  distinctions  and  technical  differentia¬ 
tions,  what  wages  are  and  what  they  are  not.  We  are  told 
that  there  is  a  great  difference  between  money  wrages  and 
actual  or  nominal,  wages;  between  money  wages  and  com¬ 
modity  wages;  between  gold  wages  and  bread  wages,  etc. 
To  explain  all  this,  some  writers  have  found  it  necessary 
to  write  voluminous  works  covering  hundreds  of  pages. 

It  seems  to  me  that  the  whole  discussion  on  wages  can  be 
greatly  simplified.  Instead  of  verbosely  distinguishing, 
with  much  show  of  learning,  between  money  wages,  and 
actual  or  nominal  or  commodity  wages,  all  of  which  means 
nothing,  and  clarifies  nothing  to  the  man  and  woman  who 
works  for  a  wage — on  the  contrary,  only  confuses  them — 
why  not  reduce  the  distinctions  to  terms  comprehensible 
to  the  average  man  or  woman?  Why  not  express  it  thus: 

Money  wages  is  a  stipulated  amount  of  money  a  man  or 
woman  receives  for  having  performed  a  certain  piece  of 
work,  or  for  having  worked  a  certain  number  of  hours  or 
days. 

Actual  or  nominal  or  commodity  wages  is  the  amount  of 
money  that  a  man  or  woman  must  pay  out  during  twenty- 
four  hours  a  day  for  seven  days  a  week  in  order  to  merely 
live  and  be  fit  to  work  at  all. 

Therefore,  in  the  aggregate,  what  the  economists  call 
money  wages  represents  the  amount  of  money  a  man  or 


309 


310 


The  New  Capitalism 


woman  receives  for,  let  ns  say,  forty-eight  to  sixty  hours  of 
work  within  a  week’s  time;  and  what  they  call  actual  or 
nominal  wages  is  the  amount  he  or  she  must  pay  out  during 
the  168  hours  constituting  the  week.  These  two  definitions 
seem  to  me  to  cover  the  subject  completely,  for  all  prac¬ 
tical  purposes. 

The  Exchange  Value  of  Wages — the 
Important  Thing 

Since  the  wage  earner  has  no  alternative  but  to  exchange 
his  wages  for  the  necessary  living  commodities  the  all  im¬ 
portant  thing  about  his  wages  is  their  exchange  value.  In 
any  discussion  on  wages  the  stress  is  to  be  put  on  the 
exchange  value  of  the  wage  dollar.  If  a  small  quantity  of 
wages  can  purchase  a  given  fair  quantity  of  living  com¬ 
modities  then  the  exchange  value  of  the  wage  dollar  can  be 
said  to  be  high.  Whereas  if  a  large  quantity  of  wages  is 
demanded  for  the  same  quantity  of  living  commodities,  then 
the  exchange  value  of  the  wage  dollar  can  be  said  to  be  low. 

The  exchange  value  of  the  wage  dollar  rises  or  falls 
inversely  as  prices  of  living  commodities  rise  or  fall.  If 
we  go  back  as  far  as  1896  and  accept  the  value  of  the  dol¬ 
lar  and  prices  prevailing  then  as  basic,  we  discover  that  the 
exchange  value  of  the  wage  dollar  has  shrunk  precisely  by 
as  many  cents  as  prices  of  living  commodities  advanced. 
The  wage  dollar  of  1920,  as  compared  with  the  wage  dollar 
of  1896,  had  an  exchange  value  of  only  about  27  cents. 
This  shrinkage  in  exchange  value  was  produced  by  the  rise 
in  the  cost  of  living  commodities.  It  may  be  stated  here, 
in  passing,  that  there  has  been  no  rise  in  the  exchange  value 
of  the  wage  dollar  from  1896  to  1920 — only  a  steady 
decline. 

It  is  rather  singular  that  the  political  economists,  so 
adept  in  inventing  and  formulating  economic  “laws”  and 
describing  their  operations  and  effects,  have  thus  far  over¬ 
looked,  or  shall  I  say,  ignored,  what  is  easily  the  nexus  of 
the  whole  wage  question,  viz.,  their  exchange  value.  None 


The  Science  of  Wages 


311 


of  them,  so  far  as  I  can  recall,  has  ever  written  a  chapter 
on  this  pivotal  point  in  the  entire  wage  controversy.  Not 
one  has  ever  pointed  ont  that  at  the  bottom  of  any  demand 
for  more  wages  is  the  desperate  endeavor  on  the  part  of  the 
workers,  in  the  face  of  constantly  rising  prices,  to  maintain 
a  reasonable  exchange  value  for  their  wages.  Not  one  has 
ever  gone  to  the  trouble  of  explaining  that  those  who  labor, 
particularly  when  they  are  organized,  may  have  something 
to  say  about  the  amount  of  wages  that  shall  be  paid  them, 
but  they  have  absolutely  nothing  to  say  about  the  exchange 
value  of  the  wage  dollar;  in  brief,  that  Labor  may  stipu¬ 
late  the  amount  of  its  wages;  it  cannot  regulate  their 
exchange  vdlue.  Nor  has  one  ever  emphasized  the  futility 
of  Labor’s  deperate  endeavor  to  maintain  the  exchange 
value  of  the  wage  dollar  in  the  face  of  Capital’s  grim 
determination  not  only  to  keep  the  quantity  of  wages  low 
but  also  their  exchange  value.  And  yet  here  we  have  the 
seeds  of  the  deadly  conflict  between  Capital  and  Labor — 
the  roots  of  the  bitter  hostility  between  those  who  pre¬ 
sumably  pay  wages  and  those  who  work  for  a  wage. 

Capital  Does  Not  Pay  Wages 

From  the  very  beginning  Capital  has  been  unwilling  to 
accord  more  than  a  bare  living  wage — indeed  less  than  a 
living  wage  per  worker.  And  when  Capital,  a  quarter  of 
a  century  ago,  began  systematically  to  raise  prices,  making 
it  necessary  for  workers  to  demand  more  wages  in  order  to 
enable  them  to  meet  the  various  price  increases — Capital¬ 
istic  Entrepreneurs  howled  as  if  every  dollar  of  wages 
apportioned  to  Labor  came  directly  out  of  their  pockets; 
and  to  this  very  hour  they  act  as  if  the  paying  of  wages  is 
taking  the  bread  out  of  the  mouths  of  their  own  wives  and 
children.  Yet,  as  a  matter  of  provable  fact,  Capital  does 
not  pay  wages  at  all.  Labor  pays  its  own  wages  out  of  the 
values  it  creates.  Certainly  it  cannot  be  disputed  that  wages 
are  paid  out  of  Labor’s  own  product. 

A  century  ago  a  number  of  economists  advanced  the 


312 


The  New  Capitalism 


“Wages  Fund”  theory.1  This  theory  emphasized,  among 
other  things,  the  dependence  of  Labor  upon  Capital,  and 
insisted  that  wages  were  paid  out  of  Capital — a  fixed  and 
predetermined  fund.  The  theory  was  in  due  time  exploded. 
It  is  no  longer  held  that  wages  are  paid  out  of  Capital. 
Professor  Seligman  says  in  so  many  wrords  that  “wages  are 
not  paid  out  of  Capital;  they  are  only  advanced  out  of 
Capital.”  The  amount  of  money  advanced  by  Capital  is 
taken  directly  out  of  the  product  of  Labor — not  out  of  any 
capital  fund.  In  other  words,  Labor  “earns  its  own  re¬ 
muneration” — actually  pays  its  own  wages.  Capital 
merely  finances  their  payment;  for  its  own  sake  and  con¬ 
venience  expedites  the  exchange  of  the  products  of  one 
group  of  workers  for  those  of  other  groups,  making  at  the 
same  time  a  profit  on  the  transactions  involved — that  is  on 
the  Several  turnovers. 

Taking  industry  in  the  aggregate  it  is  conservative  to 
say  that  in  normal  times  there  is  an  average  of  four  capital 
“turnovers”  in  the  course  of  twelve  months.  In  some 
cases  the  turnover  is  quicker,  in  others  slower — but  four 
times  a  year  is,  I  believe,  a  fair  average.  Consequently  as 
regards  the  wages  of  the  workers  in  an  industrial  estab¬ 
lishment  the  amount  of  money  necessary  to  enable  an 
employer  to  finance  the  payment  of  the  wages  of  his  work¬ 
ers  is  one-fourth  of  the  total  amount  paid  out  in  the  course 
of  the  year. 

Let  me  reduce  my  statement  to  figures,  and  so  as  to  sim¬ 
plify  my  contention  still  more  I  will  select  the  industrial 
labor  group  for  which  statistics  are  available.  In  1914 
there  were  7,036,337  workers  engaged  in  275,791  establish- 


i  John  Stuart  Mill  in  1869,  neatly  explained  the  “Wages  Fund” 
theory  as  follows : 

“There  is  supposed  to  be,  at  any  given  instant,  a  sum  of  wealth 
which  is  unconditionally  devoted  to  the  payment  of  wages  of  labor. 
This  sum  is  not  regarded  as  unalterable,  for  it  is  augmented  by 
saving,  and  increases  with  the  progress  of  wealth  ;  but'  it  is  reasoned 
upon  as  at  any  given  moment  a  predetermined  amount.  More  than 
that  amount  it  is  assumed  the  wages-receiving  class  can  not  possibly 
divide  among  them ;  that  amount,  and  no  less,  they  can  not  but 
obtain.  So  that  the  sum  to  be  divided  being  fixed,  the  wages  of 
each  depend  solely  on  the  divisor,  the  number  of  participants.” — 
Quoted  from  “The  Wages  Question,”  by  Francis  A.  Walker. 


The  Science  of  Wages 


313 


merits.  Their  wages  aggregated  $4,079,332,433,  for  the 
year.  To  finance  the  payment  of  the  total  amount  of 
wages  involved  here,  only  one-fourth  of  the  amount,  or 
$1,019,833,108  was  required  within  twelve  calendar  months. 
This  amount — mark  you  well — was  not  paid  out  by  the 
Capitalistic  employers  without  any  hope  of  ever  getting  it 
back;  it  was  merely  advanced  by  them  for  their  own  sake 
and  convenience,  knowing  full  well  that  through  the  vari¬ 
ous  established  channels  of  trade,  all  wages  must  quickly 
flow  back  into  their  coffers,  to  be  again  and  again  dis¬ 
tributed  by  them  among  the  same  workers,  as  wages. 

“Turnover”  or  “Handover” 

Yes!  We  have  heard  much  within  recent  years  of  Cap¬ 
ital  ‘  ‘  turnover. ’  ’  It  is  on  the  turnover,  or  rather  the 
frequency  of  turnover,  we  are  told,  that  Capital  makes  its 
profits.  But  when  we  probe  deeper  into  the  subject  we 
find  that  it  isn’t  out  of  the  Capital  “turnover”  so  much 
as  out  of  the  wage  “handover”  that  the  Capitalistic  group 
derives  its  enormous  profits.  Those  who  work  for  a  wage 
or  salary  have  no  alternative  but  to  hand  back  to  the  con¬ 
stituent  members  of  the  Capitalistic  System  practically 
every  dollar  of  their  wages.  Generally  speaking  what  a 
worker  earns  in  a  week  is  consumed  within  a  week.  The 
wage  he  receives  is  not  his  to  keep ;  he  is  compelled  to  hand 
it  back.  In  most  cases  it  is  consumed  (spent)  before  it  is 
earned  (received). 

An  Economic,  Paradox 

Did  you  ever  stop  to  think  that  the  average  wage  earner 
receives  not  fifty-two  times  twenty  or  thirty  dollars  (or 
whatever  his  weekly  wage  may  be) — in  the  course  of  a  year, 
but  only  twenty  or  thirty  dollars — fifty-two  times  a  year? 
Sounds  like  a  paradox,  doesn’t  it?  Well,  it  is  a  paradox — 
not  a  verbal  paradox  but  an  economic  paradox — and  I’ll 
explain  precisely  what  I  mean.  He  receives  the  same 
twenty  or  thirty  dollars  fifty -two  times  a  year.  Remember 
he  must  hand  bach  whatever  he  receives  each  iveek.  It 


314 


The  New  Capitalism 


isn’t  as  if  he  could  keep  all  he  earns  each  week,  and  let  it 
accumulate  into  a  fund.  His  weekly  wage — a  stipulated 
amount — is  turned  over  to  him  fifty-two  times  a  year ;  and 
he  is  compelled  to  hand  it  back  fifty-two  times  a  year,  or 
starve. 

Approximately  twenty-seven  million  men  and  women 
work  for  a  wage  or  salary.2  With  what  they  earn  they 
must  support  themselves  and  their  families.  For  their 
labor  they  receive,  let  us  say,  an  aggregate  of  twenty  billion 
a  year  from  the  Capitalistic  System;  but  in  the  course  of 
the  year  they  hand  their  twenty  billion  back  to  the  com¬ 
ponent  members  of  the  System.  They  gave  twelve  months 
of  labor  for  the  twenty  billion  dollars,  but  they  had  to  give 
it  practically  all  back  in  exchange  for  the  living  commod¬ 
ities,  for  food,  clothing,  shelter,  and  sundry  things  neces¬ 
sary  to  life,  or,  its  minor  comforts. 

And  this  performance  is  repeated  not  once  in  a  lifetime 
but  once  every  year.  They  receive  another  twenty  billion 
the  next  year.  No,  not  another  twenty  billion!  It  is  the 
same  twenty  billion  that  they  received  the  year  before,  and 
which,  under  the  Capitalistic  System  it  is  not  intended 
they  shall  keep.  They  are  merely  permitted  to  look  at  it 
for  a  few  days,  and  hold  it  in  their  hands ;  the  process  of 
handing  it  back  is  a  continuous  performance. 

Why  “Money  Wages ”  Means  Nothing 

Money  has  been  defined  as  the  yardstick  of  values.  If 
we  accept  this  definition  and  apply  it  to  wages,  it  follows 
that  the  men  and  women  who  work  for  a  wage  or  salary 
are  paid  only  in  yardsticks  which  they  are  not  permitted 
to  keep — only  to  handle  for  a  few  days.  Before  the  end 
of  the  week  the  yardsticks  have  found  their  way  back  into 
the  lumber-yards  of  those  who  distributed  them — none  too 
graciously;  in  most  cases  not  so  much  as  a  fraction  of  an 
inch  remains  from  the  week’s  supply  of  yardsticks. 

z  According  to  Professor  Alvin  H.  Hansen,  of  the  University  of 
Minnesota,  there  are  6,229,161  farm  laborers,  2,074,792  lower  salaried, 
1,572,225  servants;  industrial  wage  earners  14,556,979.  unclassified 
2.317.538.  American  Statistical  Association ,  December,  1920. 


The  Science  of  Wages 


315 


Money  has  been  appropriately  defined  as  a  “medium  of 
exchange.”  It  is  that,  and  only  that,  to  the  workers — a 
medium  that  must  be  exchanged  by  them  for  the  things 
needful  to  life.  They  have  no  alternative.  Money  has  also 
been  called  a  “circulating  medium.”  Aye,  it  is;  and  the 
compulsion  to  make  it  circulate  is  inherent  in  every  wage 
dollar. 

It  has  been  said  that  ‘  ‘  Profits  are  the  wages  of  Capital.  ’  ’ 
Then  by  the  same  rule  of  logic  we  ought  to  be  able  to  say 
that  “Wages  are  the  profits  of  Labor.”  The  one  is  as 
absurd  as  the  other.  “Profits,”  we  are  told,  “is  the 
amount  that  remains  after  all  costs  have  been  paid.”  A 
goodly  amount  of  profit  remains  to  Capital  after  Capital 
has  paid  all  costs,  including  labor.  Whereas  no  profits 
remain  to  Labor  after  Labor  has  paid  merely  its  living 
costs. 

Labor’s  Meager  Reward 

The  plain  truth  is  that  the  workmen  and  women  receive 
nothing  as  a  reward  for  their  labor — nothing  beyond  a 
bare  subsistence.  Comparatively  few — and  that  only  by 
dint  of  the  most  rigid  economy,  manage  to  save  a  few  paltry 
dollars.  I  say  paltry,  for  the  savings  accounts  statistics 
show  that  the  savings  of  the  eleven  million  depositors  is 
only  a  few  hundred  million  a  year — a  few  dollars  per 
capita.  You  may  double  or  treble  or  quadruple  the  amount 
of  their  “savings”  if  you  are  to  consider  what  may  have 
been  paid  by  them  for  insurance,  protection,  etc. 

Where  Are  the  Wages  of  Yesteryear ? 

If  all  the  wage  earners,  which  includes  all  salaried  people 
and  those  receiving  more  or  less  regular  lionoria  for  their 
services — the  equivalent  of  a  wage  or  salary — received  an 
amount  aggregating,  let  us  say,  an  average  of  only  ten 
billion  dollars  a  year  for  the  past  twenty  years,  their  joint 
earnings  for  the  twenty  years  would  total  the  stupendous 
sum  of  $200,000,000,000.  What  has  become  of  this  two 
hundred  billion  dollars  of  wages?  Where  is  it?  Whither 


THE  WAGE  EARNER’S  FAMILY  INCOME 
AND  WHAT  BECOMES  OF  IT 


75 


From  more  than  a  dozen  different  Tables,  I  have  constructed  in  the 
course  of  my  studies  on  Wages,  I  have  compiled  the  above  Chart  as 
approximately  showing  the  distribution  of  the  Wage  dollar — or  rather, 
the  average  wage  earner ’s  family  income.  Needless  to  say  the  figures 
are  only  approximate  estimates,  but,  I  believe,  conservative  and  fair. 
In  arranging  the  above  Chart  I  assumed  a  theoretical  $1500  a  year 
income  from  wages  for  an  average  family,  contributed  by  more  than 
one  worker  per  family.  A  $1500  yearly  wage  income  would  mean  a 
wage  income  amounting  to  about  $28.86  a  week;  or  $4.11  a  day.  The 
distribution  is  about  as  follows: 


Rent . $225 

Farm  Food  Prod.  225 
Mfgd.  Food  Prod.  150 
Clothes  .  225 


Mfgd.  Com ’dities  $150.00 

Freight  .  150.00 

Fuel  and  Light.  .  37.50 

Public  Utilities.  .  37.50 


Taxes  .  .$150.00 
Misc.  ..  112.50 
Savings  37.50 


Total  $1,500.00 

There  are  many  other  ways  of  computing  the  wage  income  distri¬ 
bution.  For  example,  you  might  say  that  the  workers  in  a  wage 
earner’s  family  work  7.7  weeks  for  the  Landlord;  7.7  weeks  for  the 
Farmer;  5.2  weeks  for  the  Manufacturer  of  Food  Products;  7.7  weeks 
for  Clothing  and  Wearing  Apparel  Manufacturers  and  Dealers;  5.2 
weeks  for  the  Manufacturers  of  and  Dealers  in  other  Living  Com¬ 
modities;  5.2  weeks  for  the  Railroads  (Freight);  1.3  weeks  each  for 
the  Fuel  and  Light  Companies  and  the  Public  Utilities  Corporations; 
5.2  weeks  for  the  Government  (Federal,  State,  City,  etc.) ;  3.9  weeks 
for  the  Miscellaneous  Items  essential  to  living;  after  wdiich  they  may 
(if  they  are  very  thrifty)  keep  the  wages  of  1.3  weeks’  work  for 
themselves. 


316 


The  Science  of  Wages 


317 


has  it  disappeared?  What  of  all  this  vast  sum  is  left  to 
those  who  worked  for  it — earned  it? 

I  am  omitting  a  dozen  pages  filled  with  rather  interest¬ 
ing  statistics  in  pursuit  of  this  inquiry,  because  it  would 
unduly  lengthen  this  chapter.  Instead  I  will  tersely  state 
my  conclusions  by  saying  that  the  average  wage  earner 
‘ i  saves 5  ’  less  than  five  cents  out  of  every  dollar  of  his  wages. 
This  isn’t  because  he  is  unwilling  to  save,  but  rather  be¬ 
cause,  under  present  economic  conditions,  it  is  impossible. 
“ Sixty-five  percent  of  our  people  are  poor”;  said  Professor 
E.  A.  Ross  in  1918,  “that  is,  they  have  little  or  no  prop¬ 
erty  except  their  clothes  and  some  cheap  furniture,  and 
their  average  annual  income  is  less  than  $200  per  capita.” 

A  Helpless  “Capitalist” 

It,  is  all  folly  to  say  that  every  worker  is  a  “  capitalist  ’  ’ ; 
it  is  more  than  mere  folly;  it  is  the  voice  of  hypocrisy 
speaking  through  the  mouth  of  knavery.  Every  working¬ 
man  and  workingwoman  is  a  capitalist,  we  have  been  told 
with  irritating  iteration  during  the  past  few  years.  Indeed ! 
A  queer  kind  of  capitalist,  you  will  admit,  is  he  who  is 
under  compulsion  to  pay  out  every  dollar  of  his  wages 
week  after  week,  merely  for  the  roof  over  his  head,  for 
food  for  his  body  and  clothes  for  his  back.  A  queer  kind 
of  capitalist  is  he  who  has  no  choice  but  to  “invest”  his 
“capital”  (labor),  and  his  “dividends”  (wages),  for  so 
many  pounds  of  food  and  so  many  yards  of  cloth — and  for 
a  place  in  which  to  live.  A  queer  kind  of  capitalist,  who 
has  no  alternative  except  to  let  his  capital  and  his  divi¬ 
dends  flow  back  through  devious  channels  and  by  sundry 
devices  into  the  coffers  of  the  economic  lords  of  creation — 
the  constituent  members  of  the  Capitalistic  group. 

The  “Wages  of  Capital” 

But  how  does  the  Capitalistic  group  fare  the  while? 
Those  constituting  the  Capitalistic  group  make  their  profits 
by  virtue  of  the  fact  that  the  wage  earners — the  non¬ 
investors,  are  compelled  to  hand  back  to  them  in  the  form 


318 


The  New  Capitalism 


of  rent,  and  the  needful  articles  of  food,  clothing,  etc.,  they 
must  purchase  in  the  course  of  a  year,  practically  the  full 
amount  of  their  wages.  What  profit  does  the  Capitalistic 
group  make  on  this  “handover”  of  wages?  Ten  percent, 
or  twenty,  or  thirty,  or  forty,  or  fifty  percent  ?  Who  knows 
the  exact  amount  of  the  profits  of  the  Capitalistic  group; 
who  has  the  authentic  statistics?  I  can  compute  the 
‘  ‘  profits  ’  ’  from  a  correlation  of  various  sets  of  available  sta¬ 
tistics,  but  this  would  lead  us  too  far  afield.  Moreover,  I 
am  less  interested  at  this  time  in  the  exact  amount  of  the 
profits  than  in  the  principle  underlying  the  transactions 
between  the  wage  earners,  i.  e.,  the  non-investors,  and  the 
Capitalistic  Entrepreneurs — the  Capitalistic  group. 

Nevertheless  while  we  are  on  this  subject  I  will  quote  a 
paragraph  from  a  minority  report  (on  the  Revenue  Bill 
of  1921)  submitted  to  Congress  by  the  Honorable  Claude 
Kitchin  of  the  Committee  of  Ways  and  Means,  and  which 
gives  an  idea  of  the  profits  of  some  of  the  big  corporations : 

“An  analysis  of  the  returns  as  detailed  in  the  report  of 
the  Commissioner  of  Internal  Revenue  since  January  1, 
1916,  up  to  and  including  the  present  commissioner’s  report 
of  July  12,  1921,  will  show  that  corporations  in  the  United 
States  made  net  profits  from  January  1,  1921,  in  round 
numbers  $50,000,000,000 — to  be  more  exact,  $47,000,000,000. 
After  deducting  all  the  taxes  they  paid  since  January  1, 
1916,  income,  excess  profits  tax,  and  other  war  taxes,  they 
have  a  clear  profit  left  of  $38,000,000,000,  more  than  four- 
fifths  of  which  was  made  by  less  than  10,000  corporations, 
and  more  than  half  of  which  was  made  by  1,026  of  the  big 
profiteering  corporations,  which  includes  the  Steel  Trust, 
the  Bethlehem  Steel  Co.,  the  Dupont  companies,  the  vari¬ 
ous  Standard  Oil  companies,  the  Coal  Combine,  the  Woolen 
Trust,  the  Meat  Packers,  etc.” 

But  whatever  the  exact  amount  of  all  the  profits  of  the 
entire  Capitalistic  group  may  be,  this  is  certain,  that  a 
considerable  part  of  the  profits  garnered  by  the  group  is 
made  out  of  the  wages  of  the  workers.  View  the  subject 
from  whatever  angle  you  will;  consider  it  from  whatever 


The  Science  of  Wages 


319 


standpoint  yon  please,  you  must  arrive  at  this  conclusion — 
that  a  considerable  portion  of  the  “profits”  of  the  Capital¬ 
istic  group  are  made  out  of  the  wages  of  the  workers. 

Turning  on  the  Searchlight 

All  this  is  a  demonstrable  fact!  Then  why  is  Capital 
so  determined  that  those  who  work  for  a  wage  shall  receive 
a  minimum  of  reward  for  their  labor?  There  is  no  logic 
in  Capital’s  reasoning  with  regard  to  wages.  What,  then, 
is  the  psychology  of  the  Capitalistic  mind?  Whatever 
charges  can  be  made  against  Capital  the  chief  Capitalistic 
Entrepreneurs  cannot  be  accused  of  ignorance,  short-sight¬ 
edness,  or  blindness.  They  know  wdiat  they  are  doing  every 
hour  of  the  day  and  night,  and  why  they  are  doing  it. 
Their  weather  eye  is  never  closed.  They  know  that  Capital 
does  not  pay  wages ;  that  Labor  pays  its  own  wages.  They 
know  that  practically  every  wage  dollar  flows  back  into  the 
Capitalistic  coffers,  and  that  Capital  makes  a  goodly  por¬ 
tion  of  its  profits  because  Labor  must  exchange  its  wages 
for  the  living  commodities.  They  know  that  the  more  wages 
Labor  receives  the  more  wage  earners  will  spend,  or  rather 
purchase ;  the  more  wage  earners  purchase,  the  greater  will 
be  the  volume  of  business ;  the  greater  the  volume  of  busi¬ 
ness  the  bigger  will  be  the  production,  the  market,  and  the 
profits. 

Or  let  me  express  it  thus :  The  greater  the  recompense 
Capital  grants  to  Labor,  the  greater  will  be  the  savings 
(and  investments)  of  the  wage  earners;  the  greater  the  sav¬ 
ings  (and  investments)  of  the  wage  earners,  the  greater 
their  contentment:  the  greater  the  wealth  and  prosperity 
of  the  nation. 

And  one  begins  to  wonder  just  why  the  Capitalistic 
Entrepreneurs  are  so  reluctant  to  apportion  decent  wages  to 
Labor ;  and  why  they  so  steadfastly  fight  against  increasing 
wages.  And  it  is  still  more  incomprehensible  why  they 
have  banded  themselves  together  as  at  present,  in  a  com¬ 
mon,  organized  endeavor  to  still  further  cut  wages — cut 


320 


The  New  Capitalism 


them  to  a  point  clearly  insufficient  to  enable  those  who  work 
to  meet  the  high  and  still  rising  living  costs. 

It  would  not  injure  the  Capitalistic  Entrepreneurs  if 
they  would  apportion  decent  wages,  or  raise  wages  and 
maintain  them  at  a  decent  level.  It  would  deduct  nothing 
from  their  capital,  and  their  wealth  accumulations  would 
proceed  the  same.  But  evidently  they  have  concluded  that 
by  raising  prices  and  lowering  wages  their  profits  can  be 
considerably  increased;  and  that  their  wealth  will,  conse¬ 
quently,  accumulate  all  the  faster.  One  discerns  behind 
the  unwilling  attitude  of  the  Capitalistic  Entrepreneurs 
with  regard  to  the  paying  of  fair  wages,  a  sinister  triple 
purpose:  to  crush  not  only  those  who  labor  for  a  wage  or 
salary,  but  the  whole  tribe  of  non-investors  into  the  dust; 
to  keep  them  from  accumulating  a  surplus;  to  hold  them 
perpetually  in  economic  subjection.  In  no  other  way  can 
I  explain  their  bitter  determination  to  destroy  organized 
Labor,  whose  chiefest  offense  thus  far  has  been  that  it  has 
insisted  on  a  quantity  of  wages  sufficient  to  enable  workers 
to  at  least  meet  the  steadily  mounting  living  costs ;  a  wage 
adequate  for  the  decent  maintenance  of  an  average  family. 

Labor’s  Side  of  the  Controversy 

Labor  is  entitled  to  more  than  it  receives.  Labor,  far 
from  being  irrational  has  been  more  than  reasonable — has 
been  patient,  long  suffering,  decent  toward  society  and 
more  than  fair  to  Capital,  though  at  times,  particularly 
under  the  stress  of  great  tribulations,  it  may  have  been 
guilty  of  the  excesses  of  aroused  passion. 

I  am  by  no  means  disposed  to  defend  physical  violence. 
None  condemns  sabotage  more  vehemently  than  I  do.  But 
let  us  be  reasonable  and  fair.  Labor,  theoretically,  has 
natural  rights,  but  no  legal  rights.  Moreover,  its  natural 
rights,  grudgingly  admitted  in  normal  times,  and  always 
circumscribed  with  legal  restrictions,  are,  in  a  crisis,  denied, 
nullified,  enjoined  and  abrogated.  It  must  be  remembered 
that  Labor  has  no  other  property  than  its  ability  to  work — 
and  that  is  a  kind  of  property  not  protected  by  specific 


The  Science  of  Wages 


321 


laws.  Labor  cannot  invoke  tlie  power  of  the  state  either  to 
defend  its  property  or  protect  its  inherent  rights;  while 
on  the  other  hand  the  power  of  the  state  is  frequently 
invoked  by  Capital  to  interfere  with  the  natural  rights  of 
the  workers.  Since  Labor  cannot  call  for  federal  troops, 
the  state  militia  or  the  community  constabulary  to  protect 
its  property,  which  is  its  labor;  or  defend  its  rights,  small 
wonder  that  occasionally  groups  of  workers,  who,  consider¬ 
ing  themselves  abused  or  aggrieved,  conclude  that  they  are 
dependent  upon  themselves — and  so  employ  their  physical 
strength  to  gain  redress  for  their  wrongs  or  to  bring  about 
an  adjustment  of  their  grievances.  In  saying  all  this  I 
want  it  understood  that  I  am  not  condoning  violence;  but 
rather  I  am  laying  some  of  the  extenuating  circumstances 
before  the  fair  minded  reader. 

The  history  of  strikes  since  the  inauguration  of  the  big 
combines  under  the  dominance  of  the  Capitalistic  Entre¬ 
preneur  group,  reveals  that  most  strikes  were  for  wage 
increases,  and  that  in  most  cases  wage  increases  were 
reluctantly  granted,  and  only  after  the  employment  of 
coercive  tactics  on  the  part  of  the  workers  concerned.  But 
whatever  might  be  said  of  the  tactics  employed,  I  challenge 
the  most  ardent  apologist  of  the  Capitalistic  System  to 
prove  that  Labor  has  ever  made  a  demand  for  what  is 
unreasonable — unless  you  call  the  perfectly  natural  desire 
to  live  decently,  and  in  moderate  comfort,  an  unreasonable 
demand. 


Capitalistic  Victories 

Certain  sensitive  Capitalistic  souls  have,  within  recent 
years,  grown  petulant  because  economic  writers  habitually 
speak  of  an  average  family  and  the  average  income  per 
family.  I,  for  one,  am  quite  willing  to  dispense  with  the 
statistical  family  of  five;  and  their  statistical  family  in¬ 
come.  I  am  perfectly  willing  to  speak  of  the  wages  per 
worker.  But  if  we  accept  that  basis  for  our  computations 
we  will  find  that  at  no  time  have  the  wages  per  worker 
been  sufficient  to  enable  a  family  of  five  to  live — not  to  say 


322 


The  New  Capitalism 


in  decency  and  comfort — but  merely  to  subsist.  Oh,  yes, 
we  speak  of  an  average  family  and  its  average  income,  but 
when  we  remember  that  there  are  in  round  numbers,  forty 
million  men,  women  and  children  “engaged  in  the  gainful 
occupations”  we  are  practically  admitting  that  the  average 
family  is  supported  by  tivo  workers ;  that  it  takes  the  earn¬ 
ings  of  two  persons  to  maintain  an  average  family. 

Does  not  this  alone  prove  that  the  Capitalistic  System  of 
Mammonisin  has  been  gloriously  victorious?  It  is  paying 
less  than  a  living  wage  per  worker.  For  an  amount  of 
wages — a  reward  that  never  was,  nor  is  it  today,  more  than 
just  sufficient  to  purchase  the  necessaries  of  life,  and  per¬ 
haps  a  few  minor  comforts — it  compels  two  members  of  an 
average  household  to  render  service.  It  must  be  clear  to 
anyone  who  has  a  head  with  which  to  think,  that  this  con¬ 
dition  constitutes  not  a  single  but  a  double  victory  for  the 
Capitalistic-Mammonistic  Entrepreneur  System. 

One  would  think  that  the  Capitalistic  Entrepreneurs, 
contemplating  the  complete  success  of  their  shrewdly  com¬ 
puted  plans,  would  rest  content  with  their  successes  and 
achievements,  and  be  disposed  henceforth  to  assume  a 
benevolent,  if  not  generous,  attitude,  toward  those  who 
labor  for  a  wage.  But  no !  Mammonism  is  like  corruption 
that  feeds  on  itself.  The  Capitalistic  Entrepreneurs  today, 
in  spite  of  the  fact  that  they  do  not  pay  the  wages  of  the 
workers,  vociferously  exclaim  that  they  are  paying  to  Labor 
higher  wages  than  they  can  afford  to  pay;  and  Mammon¬ 
ism  has  set  its  machinery — a  wonderful  mechanism — in 
motion,  to  bring  down  wages  to  a  point  where  the  joint 
earnings  of  two  persons  will  no  longer  be  sufficient  to  meet 
the  living  costs  of  an  average  family  of  five. 

The  Vendetta 

The  fight  is  waxing  bitter.  Those  who  labor  for  a  wage 
are  not  blind  to  the  fact  that  the  Capitalistic  System  is  but 
endeavoring  to  intensify  and  perpetuate  its  ancient  injus¬ 
tice  toward  those  who  toil.  They  see  the  vast  wealth  accu¬ 
mulations  of  the  Capitalistic  Entrepreneurs  growing  yearly 


The  Science  of  Wages 


323 


greater ;  and  their  own  wages  growing  less  in  quantity  and 
smaller  in  exchange  value. 

Stripped  of  cumbersome  and  confusing  phrases  the  roots 
of  the  bitter  quarrel  between  Capital  and  Labor  are  found 
in  the  unwillingness  of  the  Capitalistic  Entrepreneurs  to 
increase  the  exchange  value  of  Labor’s  wages.  Not  only  is 
there  observable  an  utter  unwillingness  to  increase  the 
amount  of  wages — there  is  evident  a  design  to  still  further 
decrease  the  exchange  value  of  the  wage  dollars  of  those 
who  labor. 

Here,  then,  you  have  the  relationship  that  exists  between 
the  Capitalistic  group  and  the  Labor  group — between  the 
Capitalistic  “investor  group”  and  the  non-investor  group. 
Relationship?  Call  it  rather  Apartship — for  relationship 
implies  some  sort  of  connection,  more  or  less  intimate  or 
formal ;  or  consanguinity,  close  or  remote ;  a  common  tie  of 
some  kind;  a  bond  of  mutual  interest,  or  a  community  of 
interests.  But  there  is,  and  there  can  never  be  as  long  as 
the  present  Capitalistic  System  exists  in  full  foree  and 
effect,  anything  even  remotely  resembling  amity  between 
these  two  mutually  antagonistic  groups.  They  are  as  wide 
apart  in  their  status  and  their  aims  as  the  poles.  It  is  more 
than  a  rift  that  separates  them ;  a  chasm  lies  between  them. 
Prom  the  very  nature  of  their  diametrically  opposed  and 
conflicting  interests,  it  is  obvious  that  bad  feeling  and 
enmity  will  keep  them  always  apart.  They  have,  and  can 
have,  nothing  in  common.  As  long  as  the  wage  earning 
non-investor  more  or  less  clearly  realizes  what  is  a  demon¬ 
strable  fact — that  he  is  permitted  to  retain  (save)  only  a 
beggarly  few  cents  out  of  every  dollar  of  his  wages,  while 
the  Capitalistic  investor  claims  as  his  share  profits — 
whether  euphemistically  called  interest,  rent,  dividends, 
surplus,  or  what  not — from  ten  to  fifty  cents  out  of  every 
dollar  of  the  worker’s  wages,  the  vendetta  will  continue 
until  one  or  the  other  group  is  annihilated,  or  the  false 
principles  of  the  economic  system,  responsible  for  the  feud, 
are  utterly  destroyed. 


CHAPTER  XXIV 


The  Philosophy  of  the  Quantity  Wage 

BUT  while  I  insist  that  Capital  could  pay,  or  rather 
apportion,  a  liberal  quantity  wage  and  be  none  the 
worse  off  for  according  it,  it  behooves  me  to  show 
the  reverse  side  of  the  shield  to  the  wage  earners  them¬ 
selves.  As  far  as  the  wage  earner  is  concerned  the  im¬ 
portant  thing  about  his  wages  is  not  the  quantity  but  the 
exchange  value  of  his  wage  dollar.  Labor  has  had  some¬ 
thing  to  say  about  the  quantity  of  its  wages,  but  it  has  had 
absolutely  nothing  to  say  about  the  exchange  value  of  its 
wage  dollars.  This  is  why  wage  earners  find  themselves 
today,  in  spite  of  what  might  be  called  a  fair  sized  quan¬ 
tity  wage,  in  a  rather  desperate  situation. 

Just  as  the  whole  labor  question  is  one  of  exchange — 
one  workman  exchanging  his  product  for  the  products  of 
other  workmen,  (money  being  merely  the  acceptable  count¬ 
ers  with  which  the  exchange  is  facilitated  or  consummated) 
— so  the  whole  question  of  wages  resolves  itself  into  one  of 
exchange  value ,  not  of  quantity.  A  high  quantity  wage 
with  a  low  exchange  value  is  an  economic  maladjustment. 
If  quantity  were  the  important  thing,  a  Russian  workman 
receiving  forty  or  fifty  thousand  rubles  a  day  would  be 
better  off  than  workmen  anywhere  in  the  world;  but,  alas, 
the  exchange  value  of  his  thousands  of  rubles  is  almost  nil. 
The  wage  compensation  of  the  German  artisan  was  never 
so  high  as  it  is  today ;  but  the  exchange  value  of  his  marks 
was  never  so  low.  The  mere  quantity  wage  is  an  ignis 
fatuus  which  if  persistently  pursued  will  lead  the  pur¬ 
suers  into  a  morass  of  difficulties  and  the  bogs  of  despair. 

When  Quantity  Wages  Were  Small 

Karl  Marx  contended  that  Capital  derived  its  profits 
from  the  unscrupulous  exploitation  of  Labor.  I  have  no 


324 


Philosophy  of  the  Quantity  Wage  325 


desire  to  enter  into  a  discussion  of  the  Marxian  doctrine, 
nor  of  any  of  its  derivatives  and  more  modern  variants. 
In  this  hook  I  am  concerned  less  with  economic  gospels  and 
theories  and  more  with  economic  facts  and  fundamental 
principles.  However,  in  the  times  of  which  Marx  wrote, 
Capital’s  exploitation  of  Labor  was  supposed  to  be  carried 
on  through  the  apportioning  of  a  small  quantity  wage  as 
Labor’s  share  of  production.  That  is  not  true  today,  for 
since  Marx  wrote  his  indictment  against  Capital,  wages  have 
doubled  and  trebled.  In  the  aggregate  quantity  wages  have 
reached  their  highest  point  in  the  whole  history  of  eco¬ 
nomics.  But  even  though  the  high  wages  paid  during  the 
war  were  to  hold  from  this  day  forth;  even  though  Labor 
were  to  receive  an  ever  increasing  portion  of  its  production, 
there  would  still  be  no  relief,  for  the  exchange  value  of 
wages  is  and  will,  under  the  established  Capitalistic  Sys¬ 
tem,  continue  to  remain  low. 

Quantity  Wages  and  Living  Cost  Increases 

Up  to  1896  wages  and  living  costs  per  family,  generally 
speaking,  ran  along  parallel  lines.  It  required  all  a  man’s 
wage  (and  those  of  the  contributing  members  of  his  house¬ 
hold)  to  pay  for  the  essentials  of  living.  Savings  out  of 
wages  in  those  years  were  the  result  of  a  denial  of  the  com¬ 
forts,  enjoyments,  and  not  infrequently,  of  the  necessaries 
of  life. 

With  the  dawn  of  the  twentieth  century  began  the 
ascendancy  of  the  Capitalistic  Entrepreneur  group.  Almost 
immediately  the  intent  of  the  Capitalistic  Entrepreneurs 
revealed  itself  in  gradual  increases  in  the  prices  of  their 
commodities — in  the  gradual  reduction  of  the  exchange 
value  of  wages. 

Definitely  speaking  the  High  Cost  of  Living  began  about 
twenty-five  years  ago.  Statisticians  and  economists  are 
agreed  that  during  the  year  1896  the  dollar  had  a  maximum 
purchasing  power — wages  their  maximum  exchange  value. 
Then  the  Trusts  and  monopolies  were  organized,  as  a  result 
of  which  prices  began  to  ascend;  and  as  prices  increased 


326 


The  New  Capitalism 


the  purchasing  power  of  the  dollar  decreased — and  the 
exchange  value  of  wages  began  to  decline.  It  is  to  be  noted 
that  the  advance  in  prices,  particularly  for  articles  of 
daily  consumption,  was  gradual,  a  quarter  of  a  cent,  half 
a  cent,  a  cent  at  a  time.  So  gradual  were  these  increases 
we  scarcely  noticed  them;  at  least  we  did  not  complain. 

It  was  organized  Labor  that  first  took  note  of  the  gradual 
upward  turn  of  the  cost  of  commodities  line  and  began  to 
demand  increases  in  its  wages  to  enable  it  to  meet  the  in¬ 
crease  in  the  cost  of  commodities — living  costs  in  general. 
Naturally,  organized  Labor  fought  only  for  itself,  but  it 
cannot  be  denied  that  the  success  of  its  own  struggles  for  a 
better  wage  and  living  conditions  also  improved  the  wage 
and  living  conditions  of  those  who  were  not  organized — 
those  who  did  not  fight.  Had  organized  Labor  not  waged  its 
fight,  economic  serfdom  and  peonage  would  have  resulted 
long  ago. 

But  in  spite  of  its  valiant  fight  organized  Labor  has  been 
only  partially  successful  in  its  attempts  to  keep  its  wages 
running  parallel  with  living  costs.  In  spite  of  the  fact  that 
it  has  succeeded  in  compelling  several  increases  in  the 
quantity  of  its  wages  it  has  not  succeeded  in  narrowing 
the  distance  between  the  two  lines.  It  did  not  succeed  in 
maintaining  the  exchange  value  of  wages. 

I  need  hardly  emphasize  that  in  1914-1919  a  new  eco¬ 
nomic  era  began.  Immediately  after  the  war  began  prices 
of  practically  everything  advanced  rapidly ;  this  time  not  a 
quarter  of  a  cent,  a  half  cent  or  a  cent  at  a  time,  but  by 
nickles  and  dimes,  and  quarters,  and  dollars.  By  1919 
living  costs  were  practically  double  what  they  were  in  1914. 
(This  time  the  landlords  took  a  hand  in  the  increases,  and 
it  must  be  said  that  they  made  up  for  the  time  they  lost 
from  1900  to  1914.) 

To  meet  the  sudden  and  tremendous  increases  in  living 
costs,  organized  Labor  demanded  further  increases  in  its 
wages.  These  demands  were,  in  the  main,  granted  without 
a  prolonged  struggle  on  the  part  of  Labor,  or  sullen  resist¬ 
ance  on  the  part  of  the  Capitalistic  Entrepreneurs.  The 


Philosophy  of  the  Quantity  Wage  327 


Government  had  adopted  the  stupid  10  percent  plus  cost 
system,  and  no  matter  how  much  Labor  demanded  or  re¬ 
ceived,  the  Capitalistic  Entrepreneurs  and  constituent  mem¬ 
bers  of  the  Capitalistic  System  were  the  beneficiaries.  In 
fact  the  more  wages  Labor  received  the  greater  the  cost, 
and  the  greater  the  profits  of  the  employers  of  Labor. 

The  system  was  satisfactory  both  to  the  workers  and  the 
Capitalistic  Entrepreneurs.  Both  imagined  themselves  in 
the  seventh  economic  heaven.  Thousands  of  wage  earners 
were  receiving  a  greater  quantity  of  wages  than  ever  before 
in  their  lives.  Small  wonder  that  many  of  them  completely 
lost  their  heads,  imagining  themselves  richer  by  so  many 
dollars  a  day,  a  week  or  a  month.  It  was  only  the  quantity 
of  wages  they  saw;  they  did  not  stop  to  consider  that  the 
increase  in  the  quantity  was  granted  to  enable  them  to 
meet  the  quantity  increase  in  price.  The  exchange  value 
of  their  wages  had  not  risen  a  single  point. 

The  Simple  Arithmetic  of  W age  Increases 

Professor  Kemmerer  has  said  that  compared  to  the  dol¬ 
lar  of  1913  the  dollar  of  1920  had  a  value  of  only  38  cents.1 
What  does  this  mean?  It  means  that  if  we  consider  the 
wages  paid  in  1913  as  basic  the  wage  dollar  was  a  100  cent 
dollar;  whereas  the  wage  dollar  in  1920,  on  account  of  the 
tremendous  increase  in  the  prices  of  living  commodities, 
had  an  exchange  value  of  only  38  cents.  The  following 
Table  shows  the  comparative  exchange  value  of  wage  dol¬ 
lars  in  1913  and  1920 : 

Exchange  Value  of 
Wages  in  1913 

$  1.00 . 

5.00 . 

10.00 . 

15.00 . 

20.00 . 

26.00 . 

30.00 . 

40.00 . 

45.00 . 

50.00 . 


Exchange  Value 
in  1920 

. $  .38 

.  1.90 

.  3.80 

.  5.70 

.  7.60 

.  9.50 

.  11.40 

.  15.20 

.  17.10 

.  19.00 


l  “High  Prices  and  Deflation,”  by  Edwin  Walter  Kemmerer. 


328 


The  New  Capitalism 


Still  another  way  of  expressing  it  is  to  say  that  for  a 
given  quantity  of  living  commodities  which  in  1913  could 
have  been  purchased  for  one  dollar  of  wages,  it  was  neces¬ 
sary  to  pay  $2.63  of  wages  in  1920.  The  following  com¬ 
parative  Table  shows  the  amount  of  wages  required  in  1913 
and  1920  to  purchase  a  given  quantity  of  living  goods: 


1913 


1920 


$  1.00 
5.00 
10.00 
15.00 
20.00 
25.00 
30.00 
35.00 
40.00 
45.00 
50.00 
100.00 


$  2.63 
13.15 
26.30 
39.45 
52,60 
65.75 
78.90 
92.05 
105.20 
118.35 
131.50 
263.00 


And  so  on. 

It  is  clear,  therefore,  that  unless  the  workers  in  1920 
received  $2.63  of  wages  for  every  dollar  of  wages  they 
received  in  1913,  they  were  worse  off  in  1920  than  in  1913. 


The  Proof  of  the  Pudding 

I  can  understand  why  those  who  are  deriving  vastly  in¬ 
creased  profits  from  the  considerably  higher  prices,  in  order 
to  exonerate  themselves  from  the  suspicion  of  profiteering, 
pretend  that  the  higher  wage  paid  to  Labor  is  responsible 
for  the  higher  prices  they  are  charging  for  Labor’s  prod¬ 
ucts;  but  I  cannot  understand  why  Labor  continues  stup¬ 
idly  to  insist  that  it  has  been  vastly  benefited  by  its  several 
wage  increases,  and  that,  too,  in  the  face  of  an  overwhelm¬ 
ing  amount  of  evidence  to  the  contrary.  The  very  fact 
that  Labor  has  demanded  more  and  more  wage  increases 
proves  conclusively  that  its  aggregate  wage  increases  dur¬ 
ing  the  past  twenty  years,  have  not  been  equal  to  the 
aggregate  price  increases  during  the  same  period.  All  sta¬ 
tistics  show  this  conclusively. 

I  have  said,  and  I  will  repeat  it,  that  while  Labor  has 


Philosophy  of  the  Quantity  Wage  329 


had  something  to  say  about  the  quantity  of  its  wage,  it  has 
had  nothing  whatever  to  say  about  the  exchange  value  of 
its  wages.  But  even  as  regards  the  quantity  of  its  wage, 
Labor  has  been  unable  to  maintain  anything  like  a  parity 
between  wages  and  living  costs,  as  the  following  statistics 
clearly  show : 

Union  Scale  of  Wages  and  Hours  of  Labor,  May  15,  1918. 
Bulletin  No.  259  (October,  1919),  of  the  Bureau  of  Labor  Statistics. 

From  the  figures  in  Tables  8  and  10  of  the  comparative  increase 
in  rates  of  wages  and  in  retail  prices  of  food  between  1907  and  1918 
may  be  stated  in  percentage  form,  thus: 


Atlanta  . Weekly  rates  of  wages  increased  43  percent 

Retail  prices  of  food  increased  109  percent 

Baltimore . Weekly  rates  of  wages  increased  41  percent 

Retail  prices  of  food  increased  125  percent 

Boston  . Weekly  rates  of  wages  increased  34  percent 

Retail  prices  of  food  increased  99  percent 

Chicago  . Weekly  rates  of  wages  increased  35  percent 

Retail  prices  of  food  increased  102  percent 

Cincinnati  . Weekly  rates  of  wages  increased  37  percent 

Retail  prices  of  food  increased  106  percent 

Denver  . Weekly  rates  of  wages  increased  38  percent 

Retail  prices  of  food  increased  91  percent 

New  Orleans . Weekly  rates  of  wages  increased  33  percent 

Retail  prices  of  food  increased  109  percent 

New  York  . Weekly  rates  of  wages  increased  27  percent 

Retail  prices  of  food  increased  101  percent 

Philadelphia  . Weekly  rates  of  wages  increased  51  percent 

Retail  prices  of  food  increased  97  percent 

Pittsburgh  . Weekly  rates  of  wages  increased  44  percent 

Retail  prices  of  food  increased  104  percent 

St.  Louis  . Weekly  rates  of  wages  increased  40  percent 

Retail  prices  of  food  increased  119  percent 

San  Francisco . .  Weekly  rates  of  wages  increased  34  percent 

Retail  prices  of  food  increased  74  percent 

Seattle  . Weekly  rates  of  wages  increased  39  percent 

Retail  prices  of  food  increased  90  percent 


The  significance  of  these  statistics  grows  when  it  is  re¬ 
membered  that  over  40  percent  of  the  average  family  budget 
goes  for  food. 


330 


The  New  Capitalism 


The  following  statistics  of  the  Department  of  Labor 
(published  in  1921)  giving  the  comparative  index  numbers 
for  union  tvage  rates  and  for  the  cost  of  living,  strikingly 
illustrate  the  utter  inadequacy  of  quantity  wage  increases. 


Year 

Union  Wage  Rates 

Cost  of  Liv 

1913 

100 

100. 

1914 

102 

103. 

1915 

102 

105.1 

1916 

106 

118.3 

1917 

112 

142.4 

1918 

130 

174.4 

1919 

148 

199.3 

1920 

189 

216.5 

Labor's  Emphasis  on  Quantity 

I  do  not  blame  wage  earners  for  putting  all  the  emphasis 
on  the  quantity  of  their  wages,  nor  for  believing  that  the 
size  of  their  pay  envelope  is  the  all  important  thing,  and 
that  the  more  wages  they  receive  the  better  off  they  are. 
I  do  not  blame  them  for  insisting  on  big  wages  to  meet 
their  already  big  living  costs;  nor  for  demanding  wage 
increases  to  meet  increasing  living  costs;  nor  for  objecting 
to  wage  reductions,  particularly  in  the  face  of  the  provable 
fact  that  living  costs  have  not  been  materially  reduced,  in 
fact  are,  in  the  aggregate,  fully  as  high  as  they  were  in 
1920.  Since  his  pay  envelope  is  the  only  thing  that  stands 
between  the  wage  earner  and  the  poorhouse,  small  wonder 
that  he  attaches  so  great  an  importance  to  its  size.  His 
labor  is  the  wage  earner’s  only  productive  property,  but 
under  the  Capitalistic  System  it  is  not  intended  that  that 
property  shall  receive  any  other  reward  than  a  mere  liv¬ 
ing — and  even  that  is  grudgingly  granted. 

Nevertheless  it  is  a  tremendous  mistake  to  imagine  that 
a  big  quantity  wage  is  the  supreme  economic  desideratum , 
or  a  panacea  for  all  economic  ills.  No  greater  misconcep¬ 
tion  is  possible;  no  greater  economic  fallacy  has  ever  en¬ 
tered  into  the  heads  of  men;  no  greater  delusion  has  ever 
played  havoc  with  the  imagination  of  the  average  man  and 


Philosophy  of  the  Quantity  Wage  331 


woman  who  works,  whether  with  hand  or  head.  From  the 
very  beginning  I  have  held  that  the  greatest  mistake  that 
Labor  ever  made  was  to  demand  an  increase  in  wages  every 
time  the  cost  of  living  advanced.  What  Labor  should 
have  insisted  upon  was  not  more  wages  but  a  greater  ex¬ 
change  value  for  its  wages.  If  Labor  had  stood  pat  twenty 
years  ago — if  Labor  had  not  demanded — if  Labor  had  (oh, 
vagrant  idealism ! )  positively  refused  to  accept  more  money 
wages  but  insisted  instead  on  a  stabilized  exchange  value 
for  its  wages — the  cost  of  living  could  never  have  mounted, 
and  the  complex  economic  problems  that  now  harass  us 
could  never  have  attained  their  present  proportions  and 
gravity.  If  Labor  twenty  years  ago  had  been  able  to  see 
beyond  the  tip  of  its  own  nose  it  could  have  compelled  an 
adjustment  on  the  part  of  the  Capitalistic  group  which 
would  have  forestalled  future  trouble,  and  rendered  im¬ 
possible  of  occurrence  the  many  evils  that  afflict  the  world 
today.  In  making  the  quantity  of  its  wages  the  para¬ 
mount  issue,  Labor  has  done  itself  an  almost  irretrievable 
injury. 

I  do  not  blame  Labor  for  its  strabismus ;  nor  Labor  lead¬ 
ers  for  following  the  line  of  least  resistance,  or  choosing 
the  easiest  way  out  of  what  seemed  to  them  a  dilemma — in 
reality  enmeshing  themselves  inextricably  in  (a  vicious 
circle.  I  dare  say  that  Labor,  individually  and  collectively, 
had  not  concerned  itself  with  economics;  in  fact  hardly 
knew  that  there  was  such  a  thing  as  the  ‘  ‘  science  ’  ’  of  Politi¬ 
cal  Economy.  It  was  not  until  the  Trusts  were  organized 
and  the  relationship  between  wages  and  the  cost  of  living 
was  thrown  out  of  plumb,  that  a  few — a  very  few — among 
those  who  toil,  began  to  think  hazily  along  economic  lines ; 
and  I  fear  me  much  that  there  has  been  considerable 
muddled  thinking  ever  since. 

The  great  control  that  certain  Labor  leaders  in  the  olden 
days  gained  over  the  rank  and  file  of  workers  was  directly 
traceable  to  this  wrong  concept  regarding  quantity  wages. 
The  rank  and  file  of  workers  grumbled  to  their  leaders. 
But  every  complaint  on  the  part  of  the  rank  and  file  was 


332 


The  New  Capitalism 


invariably  met  by  the  statement:  “Yon  used  to  get  $1.50 
a  day.  I  got  you  $3.00  a  day;  ain’t  you  satisfied?” 

The  argument  was  unanswerable.  It  was  true!  After 
all,  their  leaders  were  responsible  for  the  higher  wages 
they  were  now  receiving.  Not  one  of  them  ever  saw  that 
the  higher  wage  carried  with  it  no  increase  of  purchasing 
power.  Not  one  discerned  that  increase  in  the  quantity 
of  wages  carried  with  it  a  proportionate  decrease  in  the 
exchange  value  of  the  wage  dollar. 

Painted  Victories 

Samuel  Gompers,  President  of  the  American  Federation 
of  Labor,  in  Collier’s  Weekly  (November  27,  1920)  said: 
“By  hard  fighting  the  American  working  people  have  left 
behind  them  one  abuse  after  another.  They  have  taken 
the  children  out  of  the  industries,  they  have  abolished  the 
sweat  shop,  they  have  reduced  the  hours  of  labor,  they  have 
renovated  the  whole  factory  system,  they  have  given  the 
workman  a  place  respected  in  the  community,  they  have 
taken  away  his  rags  and  removed  from  him  forever  the 
badge  of  inferiority.  Much  of  this  progress  has  been 
gained  through  the  ability  of  workers  to  organize  cessa¬ 
tions  of  work.  ’  ’ 

Mr.  Gompers,  and  other  Labor  leaders  and  champions, 
may  be  pardoned  for  pointing  with  swelling  pride  to  some 
of  the  palliative  measures  that  have  been  established 
through  legal  enactments,  principally  at  the  behest  of  or¬ 
ganized  Labor,  such  as  improved  sanitary  conditions ;  limit¬ 
ing  the  hours  of  labor,  abolishing  the  sweat  shop,  greater 
protection  against  accident  or  disease,  better  working  con¬ 
ditions  for  women  and  children;  the  minimum  wage;  the 
employers’  liability  act,  the  compensation  act,  and  sundry 
benefits  by  law  secured,  but  the  resultant  cost  of  every 
“benefit”  secured  by  organized  Labor  has  .been  perma¬ 
nently  charged  up  to  increase  in  the  cost  of  production, 
overhead  expense,  fixed  charges,  etc.,  and  is  being  paid  for 
by  Labor  itself,  via  the  medium  of  higher  prices. 

Indeed  the  supposed  benefits  of  all  remedial  or  protec- 


Philosophy  of  the  Quantity  Wage  333 


tive  labor  laws  have  invariably  re-acted  on  the  entire  non¬ 
investor  group.  Whatever  increases  in  wages  have  been 
gained  by  the  well  organized  Labor  groups  have  been 
charged  up  as  increases  in  cost  of  production,  and  are 
being  paid  by  those  who  are  organized  and  those  who  are 
not  organized,  many  of  whom  have  had  no  increases  in 
wages.  When  the  winning  of  a  fight  for  better  wages  by 
one  small  group  of  non-investors  means  a  loss  to  all  the 
other  non-investors,  it  is,  to  say  the  least,  a  sorry  victory 
for  the  beneficiaries.  When  seventy  percent  of  the  workers 
are  penalized  for  the  benefit  of  the  other  thirty  percent, 
something  is  radically  wrong  in  the  formula. 

But  ignoring,  for  the  present,  the  deleterious  effects  of 
wage  increases  on  the  general  public,  and  putting  the  best 
possible  interpretation  upon  organized  Labor’s  well  meant 
fight  to  improve  its  own  condition  (and  incidentally  the 
condition  of  all  non-investors)  can  organized  Labor  be 
said  to  have  been  successful,  even  with  regard  to  itself? 
If  twenty-five  years  ago  the  average  wage  per  worker  was, 
let  us  say,  $12.00  a  week,  and  is  today  as  the  result  of  a 
series  of  stubborn  strikes,  $24.00  a  week,  is  not  that  suffi¬ 
cient  proof  that  Labor  has  been  victorious — that  it  has  im¬ 
proved  its  condition  100  percent. 

If  living  costs  had  remained  where  they  were  twenty 
years  ago,  and  Labor  had  succeeded  in  doubling  its  wages 
the  while,  it  could,  indeed,  claim  that  it  has  bettered  itself. 
But  living  costs  did  not  remain  stationary;  they  moved 
forward  more  rapidly,  and  generally  considerably  ahead  of 
the  increase  in  wages.  The  relative  distance  between  liv¬ 
ing  costs  and  wages  is  the  same  today  as  it  was  twenty, 
or  thirty,  or  forty  years  ago.  The  exchange  value  of  wages 
is  no  greater;  and  the  purchasing  power  of  money  and 
savings  is  considerably  less  than  in  those  former  years. 

To  clinch  the  matter  let  me  ask — Is  a  workman  who  re¬ 
ceives  $12.00  a  week,  and  who  hands  the  $12.00  back  to 
those  from  whom  he  received  it  in  order  to  live,  worse  off 
than  the  worker  who  receives  $24.00  a  w^eek  and  who  must 


334 


The  New  Capitalism 


hand  the  entire  $24.00  back  to  those  from  whom  he  received 
it,  in  order  merely  to  subsist? 

If  the  wages  of  every  worker  were  increased  by  one 
thousand  dollars  a  year,  and  living  costs  were  to  be  in¬ 
creased  by  one  thousand  dollars,  it  is  clear  that  wage 
earners  would  be  no  better  off.  And  if  the  workers’  wages 
were  increased  another  thousand  dollars  the  following  year, 
and  living  costs  likewise  advance  another  thousand  dollars, 
still  they  would  be  no  better  off.  Is  it  necessary  to  pursue 
this  point  further  ?  Is  it  not  clear  that  there  is  no  economic 
salvation,  no  hope  of  amelioration,  in  mere  quantity  wages  ? 

When  Bubbles  Burst 

There  are,  no  doubt,  those  who  belong  to  that  school 
of  philosophy  which  pretends  to  see  ‘‘books  in  the  running 
brooks,  sermons  in  stones,  and  good  in  everything,”  and 
who  will  urge  that  the  larger  quantity  wage  means  a  more 
extensive  purchasing  ability — that  is  to  say,  that  a  larger 
variety  of  things  can  be  bought  with  more  dollars  than 
with  fewer  dollars.  I  shall  not  argue  to  the  contrary; 
indeed,  for  the  sake  of  better  stating  my  point,  I  ’ll  pretend 
that  the  larger  amount,  even  though  it  has  no  greater 
exchange  value — no  greater  purchasing  power — is  prefer¬ 
able.  Have  we  not  a  better  standard  of  living  today  than 
was  enjoyed  twenty  or  thirty  or  forty  years  ago ?  Yea!  Are 
not  people  today  buying  more  luxuries,  enjoying  more  com¬ 
forts  than  they  did  twenty  or  thirty  or  forty  years  ago? 
Again  I  ’ll  agree !  But  then  I  will  say  in  rebuttal  that, 
deluded  by  mere  quantity  increase,  so  high  have  we  raised 
our  standard  of  living  that  we  will  not  be  able  to  maintain 
it  much  longer.  Surely  there  is  none  to  deny  that  the  re¬ 
cession  has  already  begun.  Millions  today  are  not  living 
in  the  same  way  they  were  living  even  five  years  ago.  Much 
curtailment  in  quantity  and  quality  of  essential  foods,  and 
other  living  commodities  is  observable.  Replacement  is 
slower.  The  more  careful  husbanding  of  the  current  re¬ 
sources  has  become  imperative.  Saving  is  almost  out  of  the 
question. 


Philosophy  of  the  Quantity  Wage  335 


Economic  Maladjustments 

Beyond  a  doubt  more  social  and  economic  maladjust¬ 
ments  are  observable  during  the  past  twenty  years  than 
during  all  the  centuries  preceding,  and  most  of  them  are 
directly  traceable  to  the  insane  notion  that  a  larger  quantity 
of  wages  means  greater  prosperity  for  the  recipient.  The 
greatest  wrong  that  has  come  from  the  system  of  high 
wages  and  low  exchange  value  is  that  it  has  made  ‘millions 
of  people  reckless  and  extravagant.  When  quantity  wages 
wTere  lower,  but  carried  with  them  a  high  exchange  value, 
people  spent  conservatively;  they  watched  their  pennies 
and  nickels  and  dimes.  A  few  dollars  were  saved.  When 
quantity  wages  increased,  accompanied  by  a  proportionate 
decrease  in  exchange  value,  unfortunately  most  wage  earn¬ 
ers  saw  only  the  increase  in  quantity ;  they  did  not  see 
that  the  exchange  value  of  every  wage  dollar  had  actually 
and  automatically  declined.  In  reality  they  were  no  better 
off!  But  this  they  did  not  see,  and  do  not  seem  to  com¬ 
prehend.  Many  of  them  followed  the  line  of  least  resist¬ 
ance — “easy  come,  easy  go.”  The  old  virtues  of  economy 
and  thrift  went  flying  through  the  window.  Wages  were 
spent  without  thought  and  without  sense.  It  will,  I  fear, 
take  some  time  before  thousands  of  wage  earners  will  change 
the  bankrupting,  poverty-bringing  habits  they  acquired 
during  a  period  of  seeming,  and  only  seeming ,  prosperity. 

4 

Let  us  be  honest  with  ourselves.  Black  clouds  are  gath¬ 
ering  in  the  heavens  overhead,  heavens  from  which  the 
once  radiant  star  of  hope  has  all  but  disappeared.  How 
long  will  it  be  before  the  storm  will  break?  We  have 
begun  to  descend  from  the  mountain  top.  The  only  ques¬ 
tion  is  how  long  will  it  take  to  complete  the  downward 
journey;  how  many  times  will  we  stumble  and  fall  in  the 
ipevitable  descent.  We  may  not  be  entirely  exhausted 
when  we  reach  the  bottom,  but  we  shall  realize  then — too 
late — that  our  dream  is  o’er — that  we  have  descended  into 
a  vale  of  tears — only  to  enter  the  deeper  valley  of  death. 
If  I  see  more  than  others  it  is  not  because  I  have  a  deeper 


336 


The  New  Capitalism 


ken  and  a  keener  vision,  but  because  I  have  looked  longer 
and  with  more  careful  eyes.  I  pray  that  the  years  to  come 
may  reveal  that  my  fears  were,  if  not  unfounded,  at  least 
exaggerated. 

Hard  Facts 

Returning  once  more  to  the  earth,  out  of  the  realm  of 
visions,  I  have  no  hesitancy  in  saying  that  Labor — organ¬ 
ized  and  unorganized — has  never  had  a  single  real  triumph ; 
it  has  never  gained  a  vital  point  in  any  controversy;  its 
victories  were  always  concessions.  Its  several  wage  in¬ 
creases  have  only  added  to  its  and  our  living  costs.  Not  a 
single  benefit  that  is  real,  not  a  single  advantage  that  is 
clear  cut  and  permanent  has  ever  been  accorded  to  Labor 
by  the  constituency  of  the  Capitalistic  System.  Labor  has 
won  in  some  of  the  minor  skirmishes;  it  has  won  a  few 
strikes;  it  has  gained  a  few  trivial  concessions;  it  has  a 
few  favorable  wage  compromises  to  its  credit.  But  until 
Labor  can  say  that  it  has  increased  the  exchange  value  of 
the  wage  dollar  it  cannot  boast  of  any  substantial  triumph. 

The  Perpetual  Interest  Charge  on  Wages 

There  is  still  another  point  that  must  not  be  overlooked 
with  regard  to  quantity  wages.  It  will  not  be  disputed 
that  Labor  pays  its  own  wages;  whatever  the  quanta — 
Labor  pays  it  to  itself.  But  not  only  does  Labor  pay  its 
own  wages,  it  also  pays  the  interest  on  its  wages.  Conse¬ 
quently  the  greater  the  quantity  of  wages  Labor  receives 
the  greater  the  amount  of  interest  it  must  pay  on  its  own 
wages.  This  is  a  most  astounding  fact,  one  rarely  dis¬ 
cussed  by  economic  writers.  And  yet  it  is  one  of  the  most 
important  points  in  the  whole  wage  question — so  important 
that  I  shall  be  at  some  pains  to  make  it  perfectly  clear  to 
even  the  humblest  intellect  among  us. 

It  will  not  be  denied  that  Capital  considers  every  dollar 
of  wages  paid  for  the  production  or  construction  of  per¬ 
manent  goods  as  an  investment.  Therefore,  Capital  charges 
wages  permanently  against  the  property,  and  insists  on 


Philosophy  of  the  Quantity  Wage  337 


collecting  interest  on  the  total  amount  of  wages  paid,  per¬ 
petually,  from  the  public — the  constituent  majority  of 
which  is  composed  of  wage  earners.  Let  me  explain  just 
what  I  mean. 

The  House  that  Jack  Built 

Let  us  say  that  in  the  year  1905  a  group  of  twenty 
workmen,  each  receiving  $2.00  a  day,  completed  a  house, 
doing  all  the  work,  excavating,  masonry,  bricklaying,  wood¬ 
work,  plastering,  painting,  etc.,  within  forty  days.  The 
house,  when  completed,  and  lot — represent,  let  us  say,  an 
investment  of  $6,000.  Of  this  amount  Labor  received 
$1,600.  Please  note  that  the  item  of  labor  will  henceforth 
be  included  in  the  investment  value,  and  interest  on  it  will 
be  computed  not  once,  but  once  every  year  thereafter. 

Now  let  us  say  that  John  Brown,  one  of  the  men  who 
worked  on  the  building,  rents  it  from  the  owner  (who  com¬ 
puted  the  rental,  let  us  say,  at  8  percent  on  his  investment), 
for  $40  a  month,  or  $480  a  year,  and  lives  in  it  for  fifteen 
years.  What  happens?  John  Brown,  the  tenant,  actually 
pays  8  percent  on  all  the  wages  paid  to  those  who  built 
the  house  in  which  he  lives.  He  pays  $480  a  year  rental. 
Of  this  amount  $128  is  interest  on  the  $1,600  of  wages 
paid  to  himself  and  nineteen  other  workmen. 2  John  Brown 
received  as  wages  for  the  forty  days  work  he  did  on  the 
house  he  occupies,  a  total  of  $80;  but  he  pays  interest 
not  only  on  the  amount  he  himself  received,  but  also  on 
the  amount  the  other  nineteen  workmen  received. 

A  fifteen  years’  tenancy  in  that  building  means  that  John 
Brown  will  have  paid  a  total  rental  of  $7,200,  of  which 
amount  $1,920  is  computable  as  interest  on  the  wages  paid 
to  the  .workmen  who  constructed  the  house  fifteen  years 
ago.  In  other  words  John  Brown  paid,  in  the  course  of 
fifteen  years,  in  the  shape  of  rent,  $1,920  interest  on  $1,600 

2  Not  only  does  John  Brown  pay  interest  on  the  wages  he  and 
nineteen  other  workmen  who  built  the  house  in  which  he  lives, 
received ;  he  also  pays  interest  on  the  wages  the  workers  who 
fashioned  the  materials,  tools,  etc.,  received. 


338  The  New  Capitalism 

wages  he  and  nineteen  other  workmen  received  fifteen 
years  ago. 

The  House  that  Jack’s  Son  Built 

Bnt  living  costs  have  gone  np.  John  Brown  and  his  fel¬ 
low  workmen  demanded  and  received  sundry  increases  in 
wages.  In  1920,  let  us  say,  John  Brown’s  son  and  his  fel¬ 
low  workers,  all  following  the  trades  of  their  fathers,  are 
receiving  each  a  wage  of  $8.00  a  day.  Just  to  illustrate 
the  effect  of  this  let  us  say  that  the  lot,  and  all  the  material, 
are  the  same  price  as  they  were  in  1905 — that  the  building 
trades  alone  had  wage  increases.  In  that  case  the  twenty 
workmen,  each  working  forty  days  and  receiving  $6.00  a 
day,  would  be  receiving  $240  per  man,  or  a  total  of  $4,800. 
This  would  bring  the  value  or  cost  of  the  $6,000  property 
up  to  $9,200. 

John  Brown,  Jr.,  rents  the  building.  Assuming  that  the 
landlord  is  content  with  8  percent  on  his  investment,  John 
Brown,  Jr.,  will  be  paying  $61.33  rent  a  month,  or  $736  a 
year.  John  Brown,  Jr.,  received  $240  as  his  share  for 
the  labor  done  on  the  building  he  now  occupies  as  a  tenant. 
When  he  pays  his  rent  he  pays,  as  interest,  on  his  own  and 
the  wages  nineteen  other  workmen  received  while  build¬ 
ing  the  house  in  which  he  lives — a  total  of  $384  a  year. 
In  the  course  of  fifteen  years  he  will  have  paid  as  interest 
on  $4,800  wages  which  he  and  nineteen  other  workmen  re¬ 
ceived  fifteen  years  ago — a  total  of  $5,760.  John  Brown 
is  considerable  of  an  optimist,  not  to  say,  cheerful  idiot — 
if  he  considers  himself  better  off  than  his  father.3 

Another  Illustration 

Surely  there  is  none  to  deny  that  every  dollar  of  wages 
that  has  been  paid  for  the  construction  of  the  railroads  in 
the  United  States  has  become  a  permanent  part  of  the  in¬ 
vestment,  and  the  public  today  is  paying  interest  on  those 
wages.  So  will  the  generations  to  come.  Tens  of  thousands 
of  those  whose  labor  built  the  railroads  are  dead  and  gone — 

3  And  what  holds  for  dwellings  is  likewise  true  of  all  buildings, 
offices,  stores,  shops,  factories,  warehouses,  storage  houses,  etc. 


Philosophy  of  the  Quantity  Wage  339 


but  the  wages  they  once  received  are  still  carried  on  the 
books  of  the  companies  as  an  investment;  and  interest  on 
that  wage  investment  of  tens  of  thousands  of  dead  and 
buried  workers  is  still  demanded  from  us.  4 

Here  is  food  for  thought.  Labor  not  only  pays  its  own 
wages,  but  pays  the  interest  on  the  wages  of  all  workers. 
And  these  interest  charges,  as  shown  in  the  case  of  dwell¬ 
ings,  the  railroads,  and  many  other  properties,  or  commodi¬ 
ties,  are  perpetual.  On  the  wages  Capital  pays  once  in  a 
current  year,  Capital  charges  interest  for  a  long  period  of 
years.  The  higher  the  aggregate  wage  the  greater  the  interest 
charge  on  the  entire  volume  of  wages  paid.5  It  is  a  vicious 
circle.  All  that  Labor  receives  as  wages  is  paid  back  in  the 
shape  of  rent  or  interest,  one  way  or  another.  Let  Labor 
sit  up  and  take  notice. 

“It  Makes  a  Difference  Whose  Ox  Is  Gored ” 

What  wrould  you  say  if  I  were  to  argue  that  since  the 
wages  paid  for  the  production,  or  construction,  of  perma¬ 
nent  goods  became  a  permanent  and  integral  part  of  an 
investment,  then  it  follows  that  those  whose  labor  increased 
the  value  of  the  property,  and  gave  permanency  to  the 
investment,  ought  to  reap  the  benefit? 

Beyond  a  doubt  a  cry  of  horror  and  the  chorus  shout  of 
“Absurd!”  from  the  lips  of  millions, — constituents  and 
beneficiaries  of  the  Capitalistic  System, — would  rent  the 
air.  And  yet  the  intimation  I  put  forth  is  less  absurd 


4  It  is  bad  enough  that  the  public  is  compelled  to  pay  interest 
perpetually  on  wages  that  were  paid  for  the  construction  of  the  rail¬ 
roads  and  the  materials  that  went  into  them  decades  and  scores 
of  years  ago ;  but  the  heinousness  of  compelling  the  public  to  pay 
interest  on  wages  that  were  never  paid,  and  high  priced  materials 
that  were  never  put  into  the  properties,  on  the  basis  of  “replace¬ 
ment  valuation,’’  must  be  obvious  to  the  veriest  tyro  in  economics. 

5  It  can  be  shown  that  the  public  pays  interest  also  on  all 
wages  paid  for  the  production  of  transient  goods — goods  to  which 
no  permanency  attaches — the  consumptive  products,  such  as  shoes, 
clothes,  all  kinds  of  wearing  apparel,  fabrics  and  textiles,  food  articles, 
perishable  goods,  coal,  etc.  etc.,  the  difference  being  that  the  interest 
is  computed  once  on  the  gross  volume  of  the  goods  produced  within 
twelve  months.  In  the  case  of  transient  goods  the  wage  invest¬ 
ment  is  repetitive  and  interest  is  collected  from  the  public  from 
year  to  year.  Whereas,  in  the  case  of  permanent  goods  the  wage 
investment  is  considered  permanent,  the  interest  charge  is  perpetual, 
and  Capital  collects  it  year  after  year.  It’s  a  distinction  without  a 
difference.  The  public  pays. 


340 


The  New  Capitalism 


than  the  actual  practice  of  the  Capitalistic  System  of 
today,  by  virtue  of  which  wages  paid  once  are  made  to 
appear  perpetually  on  the  books  of  corporations,  and  on 
which  wages  interest  is  collected  year  after  year  from  the 
very  persons  whose  labor  enhanced  the  value  of  the  invest¬ 
ment,  from  the  wage  earners,  the  non-investors,  the  public. 
I  am  merely  asking  a  question;  I  am  putting  forth  no  ad¬ 
vocacy  in  this  paragraph;  but  it  seems  preposterous  that 
those  who  gave  not  a  single  hour  of  labor  should  be  the  per¬ 
petual  beneficiaries  of  the  permanent  value  which  wage 
earners  admittedly  gave  to  their  investment. 

But  I  do  not  want  to  pursue  this  most  interesting  argu¬ 
ment  to  its  logical  end.  To  do  so  would  be  interesting,  but 
alien  to  the  purposes  of  this  book.  The  one  point,  however, 
that  I  wish  to  emphasize  is  this :  If  those  whose  labor 
added  a  certain  value  to  various  kinds  of  properties — are 
not  to  derive  a  benefit  other  than  a  wage — at  least  they 
ought  not  to  be  penalized  and  made  to  pay  perpetual  inter¬ 
est  on  the  wages  they,  or  their  associates,  may  once 
have  received. 

Quantity — Not  the  Ultima  Thule 

I  have  emphasized  that  mere  quantity  wages  is  not  the 
summum  bonum  nor  should  it  be  the  ultima  thule  of  any 
economic  arrangement.  The  exchange  value  is  the  impor¬ 
tant  thing.  Today  Labor  is  receiving  what  might  be  called 
a  maximum  wage,  but  the  exchange  value  of  its  wages  was 
never  lower.  This  is  a  point  which  Labor  owes  to  itself  to  un¬ 
derstand  fully.  Nothing  is  gained  by  self-delusion.  Certainly 
I  who  am  writing  this  book  will  not  deceive  those  who 
work  for  a  wage.  I  would  have  them  know  the  truth.  I 
will  not  lie  to  them.  I  will  not  indulge  in  ambiguity;  I 
will  not  equivocate.  Until  the  lesson  that  the  exchange  value 
of  wages  is  the  crux  of  the  wage  question  is  learned,  no 
progress  can  be  made. 


The  Genesis  of  Wages  and  Living  Costs 

CHAPTER  NXY 

IN  this  chapter  I  shall  confine  myself  to  a  brief  discus¬ 
sion  of  a  few  of  the  salient  points  entering  into  a  com¬ 
parative  study  of  Wages  and  Prices.  In  the  minds  of 
most  people  there  is  a  more  or  less  confused  notion,  sedu¬ 
lously  propagated  by  the  myrmidons  of  the  Capitalistic  En¬ 
trepreneurs,  that  wages  and  prices  are  intimately  connected 
— that  wage  increases  are  responsible  for  price  increases, 
etc.  A  moment’s  reflection  would  dispel  this  altogether 
erroneous  impression;  for  in  every  instance  prices  went 
up  first;  wages  were  increased  afterwards  (reluctantly 
enough)  to  enable  wage  workers  to  meet  the  previously 
advanced  prices.  In  view  of  which  indisputable  fact  we 
may  eliminate  wage  increases  as  a  came  for  price  increases ; 
just  the  reverse  is  true.  To  say  or  to  lead  people  to  believe 
that  wage  increases  are  responsible  for  increases  in  living 
costs,  is  putting  the  cart  before  the  horse — a  deliberate 
falsehood. 1 

A  Basic  Economic  Lie 

I’ll  waste  no  time  in  verbosely  proving  what  everybody 
knows,  that  naturally  enough  wages  enter  into  the  cost  of 
commodities — but  wages  is  not  the  only  item  that  enters  in ; 
as  a  matter  of  fact  wages  are,  for  many  commodities,  the 
smallest  item.  Several  economic  writers  have  recently 
stated  that  wages  constitute  70  percent  of  the  cost — an 
absurd  statement  utterly  disproved  by  hundreds  of  sets  of 
statistics. 

0. -A.  Mather,  a  staff  writer  of  the  Chicago  Tribune ,  in 

l  W.  Jett  Lauck  in  a  highly  interesting  and  illuminating  pamphlet 
of  92  pages,  prepared  for  the  United  States  Railroad  Labor  Board, 
shows  conclusively  that  increased  wages  to  labor  are  in  no  way 
responsible  for  increased  prices. 


341 


342 


The  New  Capitalism 


an  article  (October  18,  1921),  gives  some  interesting  sta¬ 
tistics  pertaining  to  this  subject.  According  to  these  sta¬ 
tistics  the  wages  of  railroad  employees,  who,  it  is  dinned 
into  our  ears,  receive  the  highest  recompense  of  all  workers, 
in  1901  represented  38.8  percent  of  earnings;  in  1916,  41 
percent;  in  1917,  43.7  percent;  in  1918,  54  percent;  in 
1919,  55.4  percent,  and  in  1920,  at  the  peak,  60.0  percent. 

In  other  industries:  Wages  in  the  United  States  Steel 
Corporation,  for  example,  amounted  to  33  1-3  percent  of 
earnings;  General  Motors  Corporation  38  percent;  Inter¬ 
national  Harvester  Co.  40  percent. 2 

Some,  not  content  with  giving  the  impression  that  Labor 
receives  the  lion’s  share  of  all  production,  have  gone  even 
further.  Representative  J.  W.  Fordney,  author  of  the 
Fordnev  Tariff  Bill,  which  contained  the  notorious  ‘  ‘  Amer- 
ican  valuation”  plan,  speaking  before  the  State  Manufac¬ 
turers’  Association  in  Chicago  (September  29,  1921)  said: 

“There  is  not  a  manufactured  article  produced  in  the 
United  States  in  which  the  labor  cost  is  less  than  90  per¬ 
cent  of  the  total  cost.”  Congressman  Fordney  may  hide 
behind  the  subterfuge  that  “wages”  and  “labor  cost”  are 
not  one  and  the  same  thing,  but  the  general  public  doesn’t 
know  how  to  differentiate ;  in  the  mind  of  the  average  per¬ 
son  the  two  are  closely  allied,  if  not  identical. 

James  B.  Morman,  economist  for  the  Federal  Farm 
Labor  Board,  in  an  article  September  17,  1921  issue  of  The 
Magazine  of  Wall  Street  says:  “We  find  that  the  one 
dominant  factor  in  changing  price  levels  is  the  labor  ele¬ 
ment.”  “The  cost  of  labor,”  he  says  further  on,  “is  the 
all-important  and  general  factor.”  And  then  he  proceeds 
to  explain  that  in  “labor  costs”  are  included  not  only 
wages  actually  paid  to  wage  earners,  but  salaries,  commis¬ 
sions,  and  even  profits.  Here  are  his  words : 

“Summing  up  the  entire  problem  we  find  that  the  one 


2  In  all  probability  these  percentages  include  salaries  of  officials, 
managers,  etc.  If  wages  paid  to  wage  workers  alone  were  com¬ 
puted,  the  percentage  would  be  considerably  lower  than  those  given 
by  the  corporations.  So,  too,  would  the  wages  per  wage  earner  be 
less  than  reported. 


Wages  and  Living  Costs 


343 


dominant  factor  in  changing  price  levels  is  the  labor 
element.  It  is  true  that  a  few  other  incidental  elements 
enter  into  and  affect  prices  in  the  processes  of  transporting, 
manufacturing  and  retailing  products,  but  the  all-impor¬ 
tant  and  general  factor  is  the  cost  of  labor.  Even  what 
are  called  ‘profits,’  ‘commissions’  and  other  costs  for  han¬ 
dling  raw  materials  or  goods  in  unfinished  or  finished 
form  are  the  ‘wages’  charged  by  middlemen  for  services 
of  themselves  and  their  employees  in  the  processes  of  pass¬ 
ing  such  products  on  toward  the  ultimate  purchaser  for 
use  or  consumption.  The  mere  difference  in  terms  does 
not  alter  the  principle  involved  whether  the  remuneration 
is  called  wages,  salary,  commission  or  profits.  ’  ’ 3 

If  all  these  things  are  included  under  “labor  costs”  no 
wonder  Congressman  Fordney  says  “labor  costs”  consti¬ 
tute  90  percent  of  the  total  cost. 

I  am  unable  to  understand  why  Labor  allows  the  Capi¬ 
talistic  claim  that  wage  earners  receive  the  lion’s  share  of 
recompense,  to  go  unchallenged.  A  principle  is  involved, 
of  which  wage  earners  owe  it  to  themselves  to  make  an 
issue.  Hasn ’t  Labor  a  head  as  well  as  a  fist  ?  Speaking  for 
myself,  I  should  like  to  have  all  those  who  assert  that  wages 
constitute  70  percent  of  the  cost  of  commodities,  and  those 
who,  like  Mr.  Fordney,  declare  that  labor  cost  is  not  less 
than  90  percent  of  the  total  cost — prove  their  contention 
— let  us  say,  for  example,  with  regard  to  steel  rails,  or  any 
other  manufactured  article  for  the  matter  of  that;  or  for 
a  commodity  such  as  coal,  for  example. 

The  “Percentage”  Device 

But  let  us  pursue  our  studies  anent  prices  and  wages. 
No!  Wage  increases  are  not  responsible  for  increases  in 
prices  of  commodities,  or  in  living  costs  in  general.  This 
is  so  obvious  that  I  almost  consider  it  a  waste  of  space  to 
dwell  at  length  on  this  point.  The  utterly  dishonest  and 
disreputable  Capitalistic  device  of  computing  increases  in 

3  Excerpt  from  "Why  Commodity  Prices  Fluctuate,”  by  James  B. 
Morman,  in  The  Magazine  of  Wall  Street,  September  17,  1921. 


344 


The  New  Capitalism 


percentages ,  is  responsible  for  the  wrong  impression  that 
has  taken  hold  of  the  average  person ’s  mind — that  wage  in¬ 
creases  are  responsible  for  price  increases,  or  for  what 
collectively  we  call  increased  living  costs.  It  is  to  be  re¬ 
gretted  that  the  average  man  or  woman  has  neither  the 
time,  nor  facilities,  for  examining  into  this  subject.  It  is 
indeed  remarkable  that  not  one  of  the  hundreds  of  writers 
on  economic  subjects,  whose  writings  are  regularly  pub¬ 
lished  in  the  daily  press,  in  financial,  trade  papers  and 
commercial  periodicals,  have  ever  gone  to  the  trouble  of  ex¬ 
posing  the  scurvy  trick.  “There  can  be  no  doubt, ”  says 
one  so-called  economic  writer,  ‘  ‘  that  if  a  hat-maker  receives 
$1.50  a  day  for  making  hats  that  sell  for  three  dollars 
apiece,  and  his  wages  have  been  increased  100  percent — so 
that  he  now  earns  three,  that  the  increase  in  wages  neces¬ 
sarily  raises  the  price  of  each  hat  to  six  dollars.’ ’ 

The  questions  in  the  case  of  the  hatmaker  to  be  answered 
are:  How  many  hats  does  the  hatmaker  turn  out  in  a 
day,  and  how  many  cents  will  his  $1.50  (or  100  percent) 
increase  in  wages  add  to  the  cost  per  hat?  But  most 
pseudo-economic  writers  prefer  not  to  bother  with  such 
trifling  details.  It  seems  to  be  so  much  simpler,  and  alto¬ 
gether  more  convenient  and  satisfactory,  to  deal  in  per¬ 
centages. 

George  E.  Roberts,  Vice  President  of  the  National  City 
Bank  of  New  York,  in  one  of  his  pamphlets  says :  “People 
seem  inclined  to  blame  the  big  corporations,  ‘  big  business,  ’ 
the  ‘trusts,’  or  somebody  in  that  category,  for  the  rising 
costs  of  living.  But  the  price  tables  show  that  the  prices 
of  manufactured  goods  have  increased  by  lower  percentages 
than  the  cost  of  the  labor  and  the  raw  materials  that  en¬ 
tered  into  them.” 

This  is  a  typical  example  of  Capitalistic  camouflage — 
an  artistic  blending  together  of  half  truths,  perversions  of 
the  truth  and  just  plain  lies.  I  challenge  Mr.  Roberts  to 
substitute  for  the  dishonest  percentage  basis  of  figuring 
increases,  the  dollars  and  cents  basis,  which  if  he  will  do  a 
different  state  of  affairs  than  he  claims,  will  be  revealed. 


Wages  and  Living  Costs 


345 


The  “Cent”  System  versm 
the  “Percentage  System” 

I  call  for  the  abrogation  of  the  Percentage  System  of 
computing  increase  in  costs  and  prices,  and  the  substitution 
of  the  cent  system.  Let  me  briefly  illustrate  the  difference 
in  principle  between  the  two  systems. 

Let  us  say  that  when  the  basic  price  of  hogs  was  $6.00 
per  hundredweight  (six  cents  a  pound)  the  wholesale 
slaughterer  sells  the  hog  products  to  the  retail  dealer  for 
twelve  cents  a  pound ;  and  the  retail  dealer  sells  same  to  the 
public  for  eighteen  cents  a  pound. 

Now  let  us  say  that  the  price  of  hogs  has  gone  up  to 
$12  per  hundredweight — an  increase  of  six  cents  per  pound, 
or  rather  an  increase  of  100  percent.  This  100  percent 
increase  is  passed  along  to  the  consumer.  Under  the  ex¬ 
tortion  of  the  Percentage  System  of  figuring  increases  the 
retail  dealer  now  pays  twenty-four  cents  a  pound  for  the 
hog  products,  and  sells  same  to  the  public  for  forty-eight 
cents  a  pound.  The  percentage  increase  formula  reads 
about  as  follows: 

Basic  Prices  100  per  cent  increase 

per  pound  Prices  per  pound 

Hogs  .  6  cents  Hogs  . 12  cents 

Hog  products  to  dealer .  12  cents  Hog  products  to  dealer .  24  cents 
Same  to  the  public . 18  cents  Price  of  same  to  public ..  48  cents 

The  consumer  pays  three  separate  100  percent  increases. 

But  under  the  cent  system  of  figuring  increases  the 
formula  would  be  as  follows: 

Basic  Prices  Six  cents  increase 

per  pound  Prices  per  pound 

Hogs  .  6  cents  Hogs  . 12  cents 

Hog  products  to  dealer .  12  cents  Hog  products  to  dealer. .  18  cents 
Same  to  the  public . 18  cents  Same  to  public  . 24  cents 

This 'would  be  fair  and  reasonable — the  consumer  would 
pay  the  actual  number  of  cents  increase  in  the  basic  cost 
once ,  not  a  100  percent  increase  three  times  (or  oftener) 
as  is  the  case  under  the  Percentage  System  of  computing 


increases. 


346 


The  New  Capitalism 


The  Science  of  Profiteering 

It  is  under  the  guise  of  this  Percentage  System  of  com¬ 
puting  increases  that  profiteering  has  been  raised  to  the 
dignity  of  a  science.  It  is  not  difficult  to  see  that  since  the 
average  commodity  passes  through  three  or  four  hands 
before  it  ultimately  reaches  the  consumer,  each  person  or 
firm  figuring  percentage  of  increase,  that  the  sale  price 
will  reach  such  a  sightly  figure,  even  though  the  increase 
in  wages  per  unit  of  production,  figured  in  dollars,  or 
cents,  is  trifling.  Thus,  for  example,  if  the  item  of  wages 
on  a  given  article  which  the  manufacturer  sells  to  the 
wholesaler  for  one  dollar  is  30  cents,  and  the  wages  go 
up  100  percent,  or  to  60  cents,  the  manufacturer  will 
raise  his  price  to  the  wholesaler  100  percent,  or  to  $2.00. 
The  wholesaler,  who  used  to  sell  the  article  to  the  retailer 
for  $1.50,  will  now  raise  the  price  100  percent,  or  to  $3.00. 
The  retailer,  who  used  to  sell  it  for  $2.00,  will  now  sell  it 
for  $4.00.  This  example  is  intended  to  show  the  principle 
of  the  Percentage  System  in  figuring  wage  and  price 
increases.  The  point  to  be  emphasized  is  that  the 
final  purchaser,  alias  the  ultimate  consumer,  pays 
three  (or  more)  separate  100  percent  increases.  It  is  an 
excellent  system  from  the  profiteer’s  standpoint. 

For  the  sake  of  greater  emphasis,  I’ll  repeat,  that  in  all 
cases  prices  were  advanced  before  wages  were  increased. 
But  even  if  the  wage  increases  had  preceded  increases  in 
commodity  prices,  or  in  living  costs,  it  could  be  shown 
that  in  all  cases  the  increase  in  prices,  per  unit  of  produc¬ 
tion,  were  considerably  greater  than  the  increases  of  the 
workers’  wages.  A  single  specific  example  will  suffice  to 
illustrate  my  contention : 

In  1915,  according  to  the  Shoemakers’  Journal,  August, 
1921,  the  amount  of  wages  paid  for  making  a  pair  of  a 
given  quality  of  men’s  shoes,  was  60  cents; -this  shoe  sold 
retail  for  $3.50. 

In  1918  the  amount  of  wages  paid  for  making  the  same 
shoe  was  $1.02 — an  increase  in  wages  of  62  cents  per  pair; 


Wages  and  Living  Costs 


347 


but  the  retail  price  was  advanced  to  $10  and  $12 — an  in¬ 
crease  to  the  consumer  from  $6.50  to  $8.50  a  pair. 


Steel  Prices  and  Wages 

That  the  quantity  increase  in  prices,  per  unit  of  produc¬ 
tion,  is,  generally  speaking,  considerably  greater  than  the 
quantity  increase  in  wages  per  unit,  is  bountifully  exem¬ 
plified  in  the  steel  industry,  for  which  complete  data  for 
wage  and  price  increases  are  available.  The  data  for  wages 
are  from  the  official  announcement  made  by  Elbert  H. 
Gary,  Chairman  of  the  Board  of  Directors,  August  19, 
1921;  and  those  for  prices  are  taken  from  the  Iron  Age: 


Feb. 

1, 

1915 

$2.00 

Feb. 

1, 

1916 

2.20 

May 

1, 

1916 

2.50 

Dec. 

15, 

,  1916 

2.75 

May 

1, 

1917 

3.00 

Oct. 

1, 

1917 

3.30 

Apr. 

16 

,1918 

4.80 

Aug. 

1, 

1918 

4.20 

Oct. 

1,1918 

4.62 

Feb. 

1, 

1920 

5.06 

May 

16 

,  1921 

4.05 

July 

16 

,  1921 

3.70 

Aug. 

29 

',1921 

3.00 

*  Price  not 

given. 

Bessemer  Bessemer 
Steel  Rail  Pig  Iron  at 
at  Mill  Pittsburgh 


$28.00 

$14.55 

28.00 

21,51 

33.00 

21.95 

38.00 

35.68 

38.00 

45.15 

* 

37.25 

55.00 

36.15 

55.00 

36,60 

55.00 

36.60 

55.00 

42.90 

47.00 

26.16 

47.00 

22.84 

47.00 

21.96 

Bessemer 

Basic  Pig 

Steel  Billets 

Iron  F.O.B 

at  Pittsburgh 

Furnace 

$19.50 

$12.50 

33.50 

17.69 

45.00 

18.00 

57.50 

30.00 

86.00 

41.60 

49.38 

33.00 

47.50 

32.00 

47,50 

32.00 

47.50 

33.00 

55.25 

42.25 

37.00 

22.00 

32.25 

19.38 

29.60 

18.20 

Comment  is  hardly  necessary.  The  figures  speak  for 
themselves.  Similar  price  increases  can  be  noted  for  all 
of  the  88  iron  and  steel  products  listed  in  the  War  Indus¬ 
tries  Board’s  Price  Bulletin  No.  33.  All  conclusively  show 
that  the  dollar  and  cents  increases  in  the  prices  of  the 
articles  produced,  were  considerably  greater  than  the  dollar 
and  cents  increases  in  the  wages  of  those  who  produced 
them.  4 

John  Skelton  Williams,  at  the  time  Comptroller  of  the 

4  As  a  matter  of  fact  an  official  of  the  Bethlehem  Steel  Corporation 
himself  admits  that  wage  increases  are  not  the  principal  reason  for 
the  increase  in  the  prices  of  iron  and  steel  products.  I  quote  this 
official’s  statement  further  along"  in  this  chapter. 


348 


The  New  Capitalism 


Currency,  in  his  letter  to  Elbert  H.  Gary  says,  speaking 
of  the  1918  report  of  the  United  States  Steel  Corporation: 

“We  find  that  they  received  an  average  of  $87.70  per 
ton  for  every  ton  of  the  14,124,986  tons  of  rolled  steel  and 
other  products  shipped  to  domestic  and  export  trade.” 

According  to  Mr.  Williams  “the  United  States  Steel 
Corporation  paid  out  during  the  calendar  year  1918  on 
pay  rolls,  including  administrative  and  selling  departments, 
as  well  as  all  manufacturing  departments,  a  total  of  $452,- 
663,524” — (in  other  words  a  trifle  more  than  thirty  dollars 
per  ton  for  all  wages  and  all  salaries). 

Mr.  Williams  declares  that  the  earnings  of  the  United 
States  Steel  Corporation  “were  so  large  that  the  Company 
could,  during  the  year  1918,  have  doubled  the  salaries  and 
wages  paid  to  everyone  of  its  268,710  employees  and  offi¬ 
cers,  amounting  to  $452,663,524,  and  would  have  had  a 
surplus  of  $96,517,000  left  over.” 

From  all  of  which  it  is  clear  that  the  quantity  increase 
in  the  price  of  steel  products  was  not  caused  by  any 
quantity  increase  in  wages;  and  that  the  dollar  and  cents 
increase  in  prices  was  many  times  greater  than  the  dollar 
and  cents  increase  in  wages. 

One  Dollar  Wage  Increase — Two  Dollars 
Living  Cost  Increase 

These  disposed  to  argue  that  the  tremendous  increase  in 
retail  prices  was  caused  by  marked  increases  in  the  prices 
of  the  various  materials  going  into  commodities,  are  involv¬ 
ing  themselves  in  a  vicious  circle.  If  the  increase  in  the 
price  of  every  kind  of  material  going  into  a  shoe  (or  any 
other  commodity)  is  fairly  computed  in  dollars  and  cents, 
instead  of  percentages,  it  will  be  found  that  the  aggregate 
increase  in  the  price  of  all  materials  used  does  not  begin  to 
justify  the  tremendous  increase  in  the  price  of  shoes  (or 
other  commodities). 

No  matter  what  article  you  take,  whether  manufactured 
or  one  whose  production  is  not  complicated  with  other  ma¬ 
terials — coal,  for  example — if  the  cent  system  is  used  in- 


Wages  and  Living  Costs 


349 


stead  of  the  Percentage  System,  it  will  be  found  that  in 
every  instance  the  price  increase  per  unit  of  production, 
was  considerably  greater  than  the  increase  in  wages  per 
unit  of  production.  Which  being  the  case,  it  is  unfair  to 
Labor  and  to  the  public,  to  pretend  that  so-called  high 
wages  are  responsible  for  the  prevailing  high  prices. 

No  matter  which  industry  we  analyze  in  an  endeavor 
to  discover  the  relationship,  if  any  exists,  between  wage 
increases  and  price  increases,  we  observe  the  same  phe¬ 
nomenon.  For  every  dollar  of  wage  increase  per  unit  of 
production,  there  has  been  an  increase  of  from  two  to  ten 
(and  more)  dollars  in  the  price  of  the  commodity  con¬ 
sumed.  And  for  every  dollar  of  increase  that  wage  earn¬ 
ers  received  the  living  costs  increased  not  less  than  two 
dollars.  When  I  say  this  I  wish  it  to  be  understood  that 
I  am  not  guilty  of  exaggeration ;  on  the  contrary  I  am  un¬ 
derstating  the  actual  condition,  particularly  if  we  ex¬ 
tend  the  discussion  to  cover  living  costs  in  general — which 
includes  the  item  of  Rent. 

From  1900  to  1914  the  cost  of  living — that  is  with  regard 
to  all  commodities  produced  by  Labor,  or  into  which  the 
element  of  labor  entered — all  except  rent — practically 
doubled ;  but  wages  did  not  double  within  the  same  period. 
In  1900  the  cost  of  living  per  family  was  approximately 
$650.  By  1914  the  cost  of  living  had  mounted  to  $1,100, — 
an  increase  of  $450;  whereas  the  wages  per  worker  had 
advanced  from  $417  in  1900  to  only  $580  by  1914, — an 
increase  of  only  $163.  The  only  thing  that  made  the  situa¬ 
tion  endurable  was  the  fact  that  rents  did  not  rise  ma¬ 
terially  between  1900  and  1914.  For  whatever  reason  land¬ 
lords  did  not  dare  to  raise  their  rentals  appreciably  up  to 
that  time. 

Doubling  the  Rent 

From  1914  to  1920  living  costs  practically  doubled.5  This 

5  In  November,  1919,  the  Bureau  of  Applied  Economics  reported  that 
the  minimum  of  subsistence  level  was  approximately  $1,575  in  the 
latter  part  of  1919  ;  whereas  the  cost  of  maintaining-  the  minimum 
of  comfort  level  was  $1,760  in  June,  1918  ;  and  approximately  $2,000 
in  1919. 


350 


The  New  Capitalism 


time  the  landlord  took  a  hand.  Rents  were  practically 
doubled,  were  increased  100  percent,  since  that  is  the 
language  some  understand  best.  Why?  On  account  of 
the  increase  in  the  wages  of  those  engaged  in  the  building 
trades,  some  will  quickly  answer.  Indeed?  What  are  the 
facts?  The  facts  are  that  probably  ninety-five  percent  of 
all  the  buildings  and  apartments  occupied  by  tenants  were 
built  under  old  wage  rates  and  scales.  Many  of  the  build¬ 
ings  are  ten,  fifteen,  twenty  and  more  years  old — erected 
when  all  building  wages  (and  materials)  were  low.  But 
for  all  buildings,  regardless  of  when  erected,  rentals  were 
increased,  in  round  numbers,  an  average  of  100  percent. 
The  landlords  computed  the  increases  on  the  basis  of 
present  day  building  costs — present  day  prices  for  wages 
and  materials.  They  reasoned  thus:  If  we  had  put  up 
our  building  in  1920  instead  of  in  1900,  or  1905,  or  1910, 
it  would  have  cost  us  thus  and  thus  much ;  therefore  we  are 
justified  in  charging  rentals  based  upon  1920  prices  of 
wages  and  materials. 6  This  is  the  kind  of  rotten  economic 
logic  that  is  universal  today,  and  not  a  single  economic 
writer,  or  statesman,  to  challenge  it. 

Wages  That  Were  Never  Paid 

Still  confining  myself  to  the  item  of  wages  paid  to  the 
workers  in  the  building  trades,  I  have  shown  in  a  preced¬ 
ing  chapter  that  the  tenant  pays  annual  interest  on  every 
dollar  of  wages  that  goes  into  a  building,  whether  applied 
on  the  production  of  the  material  or  for  the  labor  of  actual 
construction.  That’s  bad  enough;  but  to  charge  the  ten¬ 
ants  interest  on  labor  that  was  never  performed,  and  on 
wages  that  were  never  paid — is  a  crime  against  common 
decency  and  though  sanctioned  by  “economic  laws”  and 
“good  business  practice,”  I  denounce  it  as  a  heinous 
offense  against  the  public. 

And  what  I  say  of  dwelling  places  applies  with  equal 

e  Those  with  keener  vision  will  probably  emphasize  the  increased 
price  of  coal,  taxes,  insurance,  janitor’s  wages,  etc.  Very  well!  but 
let  them  compute  the  aggregate  increases  in  dollars  and  cents,  not 
in  percentages. 


Wages  and  Living  Costs 


351 


force  to  office  and  store  buildings,  factories,  warehouses, 
storage  plants,  etc.,  all  of  which  helps  to  explain  not  only 
the  increase  in  the  prices  of  commodities — but  living  costs 
in  general.  It  is  bad  enough  to  compute  prices  of  com¬ 
modities  on  the  basis  of  higher  costs  actually  chargeable, 
but  to  compute  them  on  fictitious  costs  is  an  economic 
crime  that  cries  to  heaven  for  vengeance.  Here  wre  see 
two  of  the  Capitalistic  devices  employed  to  exploit  the 
public;  1, — the  Percentage  System;  and  2, — charging 
rentals  on  the  basis  of  what  it  pleases  some  to  call  “re¬ 
placement  value.” 

At  any  rate,  out  of  all  this,  one  thing  stands  out  clear 
and  strong,  and  that  is  that  Labor — the  wage  earners — 
cannot  be  blamed  for  the  100  percent  increase  in  the  item 
of  rent  with  regard  to  95  percent  of  buildings.  Nor  are 
wage  earners  responsible  for  the  high  prices  of  most  com¬ 
modities. 

The  Nation’s  Tremendous  Freight  Bill 

By  far  the  greatest  increase  in  the  list  of  “costs”  is  the 
item  of  freight.  The  several  freight  increases  allowed  to 
the  carriers  means  that  the  public  is  paying  freight  bills 
amounting  to  several  billion  dollars  a  year  over  former 
years.  Just  a  few  examples,  to  give  substance  and  edge  to 
my  statement. 

A  lumber  dealer,  writing  to  Capper’s  Weekly ,  July  2, 
1921,  says  in  his  letter: 

“Ten  years  ago  or  less,  it  cost  $5.50  a  thousand  to  put 
lumber  in  our  yard.  That  is  what  freight  bills  called  for 
then.  Now  it  costs  $21.75  per  thousand  feet.” 

In  the  1921  “literature”  prepared  by  the  National  Coal 
Association  (Washington,  D.  C.)  we  read  as  follows: 

“Freight  rates  have  approximately  doubled  since  1914. 
Where  the  average  freight  rate  was  about  $1.50  a  ton  in 
pre-war  days,  the  average  rate  now,  so  far  as  it  is  possible 
to  strike  an  average,  is  about  $3  a  ton.  For  long  distances 
from  the  mines  the  freight  rates  run  much  higher  than 
$3  a  ton. 


352 


The  New  Capitalism 


“This  increase  of  $1.50,  applied  to  a  yearly  production 
of  550,000,000  tons,  represents  an  advance  in  the  cost  of 
coal  to  the  consumer  of  the  country  over,  on  account  of 
freight  charges ,  of  $825, 000, 000.’  ’ 

The  following  is  from  an  item  that  appeared  in  the 
Chicago  Daily  News ,  October  10,  1921 : 

“  Kelationship  between  increased  freight  rates  and 
cement  prices  is  shown  in  a  statement  prepared  by  the 
Universal  Portland  Cement  Company.  It  says  in  part : 

“  ‘The  freight  rate  from  Buffington,  Ind.,  to  Milwaukee, 
for  example,  in  1917  was  23  cents,  and  now  is  49  cents  a 
barrel.  This  is  an  increase  in  freight  rates  since  1917  of 
about  113  percent. 

“  ‘In  considering  these  comparative  increases  of  37  per¬ 
cent  in  cement  prices  and  113  percent  in  freight  rate,  it 
should  be  borne  in  mind  that  the  effect  of  increased  freight 
rates  is  not  confined  to  the  cost  of  moving  the  finished 
product  from  mill  to  destination;  the  higher  rates  apply 
also  on  incoming  raw  materials,  and  thus  affect  the  cost 
of  manufacture  as  do  taxes  and  other  factors  over  which 
the  manufacturer  has  no  control.  ’  ” 

According  to  an  editorial  note  by  Arthur  Brisbane 
(October  10,  1921)  : 

“You  can  buy  brick  now  wholesale  at  $16  a  thousand. 
That  sounds  cheap,  compared  with  $40  and  more  not  long 
ago.  It  sounds  dear  compared  with  $6  and  $8,  the  old 
price  for  ordinary  brick.  But  the  price  of  brick  makes 
little  difference  when  you  consider  the  price  of  hauling. 
To  haul  a  thousand  bricks  less  than  fifty  miles,  some  rail¬ 
roads  charge  $15,  about  100  percent  more  than  brick  used 
to  cost  delivered,  not  so  long  ago.  They  say  ‘Freight  rates 
do  not  affect  the  consumer.’  They  do,  if  you  pay  a  cent 
and  a  half  to  carry  one  brick  fifty  miles.” 

Letting  the  Cat  Out  of  the  Bag 

But  the  most  authoritative  proof  that  for  many  commodi¬ 
ties  freight  rates,  rather  than  high  wages,  are  responsible 
for  the  prevailing  high  prices,  we  find  in  the  September 


Wages  and  Living  Costs 


353 


1921  Monthly  Review  Letter  issued  by  the  National  City 
Bank  of  New  York,  of  which  George  E.  Roberts,  already 
quoted  in  this  chapter,  is  the  author : 

“Mr.  Grace,  President  of  the  Bethlehem  Steel  Company, 
has  made  a  statement  explaining  that  if  allowance  is  made 
for  the  increase  in  costs  due  to  railroad  charges,  steel 
products  are  now  lower  than  before  the  war.  In  an¬ 
nouncing  new  and  lower  prices  for  steel  products,  going 
into  effect  on  July  5th,  last,  Mr.  Grace  said : 

“  ‘The  increase  in  freight  rates  has  been  the  largest 
factor  in  increasing  the  cost  of  manufacturing  steel  prod¬ 
ucts  because  the  making  of  a  ton  of  finished  steel  involves 
the  transportation  of  more  than  five  tons  of  raw  materials. 
The  cost  factors  next  in  importance  are  raw  materials  and 
labor. 

“  ‘Taking  as  an  example  the  price  of  structural  shapes, 
under  the  new  schedule  of  prices,  2  cents  a  pound,  or 
$44.80  a  gross  ton,  the  comparison  with  pre-war  prices, 
reflecting  concretely  the  three  more  important  cost  factors 
is  as  follows: 

“  ‘1st:  The  increase  over  pre-war  cost  in  transportation 
on  ore,  coal,  limestone,  scrap  and  miscellaneous  supplies 
amounts  to  $7.85  per  ton  of  finished  steel. 

‘  ‘  ‘  2nd :  The  increase  in  the  cost  of  coal,  ore,  limestone, 
alloys,  refractories,  lubricants  and  miscellaneous  supplies 
at  point  of  shipment  amounts  to  $7.10  per  ton  of  finished 
steel. 

‘  ‘  ‘  3rd :  The  increase  in  the  cost  of  labor  under  the 
present  wage  scale,  as  compared  with  pre-war  wages  in 
the  steel  plant  proper,  is  $5.64  per  ton  of  finished  steel. 

“  ‘The  figures  I  have  used  are  the  result  of  actual  com¬ 
pilation  made  by. the  Company’s  comptroller  in  the  every 
day  conduct  of  the  business.’ 

“Iron  and  steel  products  enter  into  farm  implements, 
railroad  costs,  and  the  costs  of  every  line  of  industry.  ’  ’ 

I  have  nothing  to  say  in  comment  of  Mr.  Grace’s  state¬ 
ment  at  this  time,  except  that  his  figures  show  that  of  the 
increase  in  the  price  of  the  finished  steel  per  ton,  $7.85 


354 


The  New  Capitalism 


went  to  the  railroads,  $7.10  to  the  mine  owners,  and  those 
who  have  a  monopoly  on  raw  materials,  and  $5.64  to  labor. 

Needless  to  say  neither  Mr.  Grace,  nor  Mr.  Roberts  of 
the  National  City  Bank,  offered  the  above  statement  by 
way  of  exonerating  Labor  from  the  unjust  charge  that  the 
high  wages  paid  to  industrial  workers  are  responsible  for 
high  prices.  Quite  the  reverse.  The  statement  is  really 
intended  as  a  twin  argument  for  a  still  further  reduction 
in  the  wages  of  railroad  employees  and  in  the  wTages  of 
industrial  workers.  The  intended  inference  is  that  freight 
rates  are  high  on  account  of  the  wages  railroads  are  pay¬ 
ing  their  employees. 

The  Monthly  Review  Letter  of  the  National  City  Bank 
of  New  York,  from  which  I  have  already  quoted,  mentions 
that  reduction  in  wage  rates  “  probably  would  permit  of 
an  even  greater  reduction  in  freight  rates,  particularly  if 
it  is  accompanied  by  corresponding  reductions  throughout 
all  the  industries,  because  the  stimulus  given  to  business 
would  increase  the  volume  of  railroad  traffic.  Railroad 
rates  are  under  public  supervision,  and  there  is  every 
reason  to  believe  that  they  would  be  made  to  conform  to 
increased  earnings. 

“  Finally,  such  a  general  reduction  of  industrial  costs 
would  reduce  the  ‘cost  of  living,’  not  only  to  railroad  em¬ 
ployees  but  to  wage-earners,  farmers  and  everybody,  in¬ 
crease  the  purchasing  power  of  the  entire  population,  en¬ 
large  the  consumption  of  all  products,  and  improve  the 
whole  situation.  ’  ’ 7 

The  Bach-Fire  of  Capitalistic  Logic 

Harking  back  once  more  to  Mr.  Roberts’  queer  statement 
that  “the  prices  of  manufactured  goods  have  increased  by 
lower  percentages  than  the  cost  of  the  labor  and  the  raw 
materials  that  entered  into  them  ’  ’ — there  *  is  a  modicum 


T  The  wages  of  railroad  employees  were  reduced  by  $400,000,000 
notwithstanding  which  reduction  railroad  officials  immediately 
announced  that  freight  rates  would  not  be  lowered.  The  evident 
design  of  the  Capitalistic  interests  is  to  bring  the  wages  of  railroad 
employees  down  to  the  level  of  workers  in  the  industries. 


Wages  and  Living  Costs 


355 


of  truth  in  his  claim  that  the  increase  in  the  cost  of  raw 
materials  has  helped  to  increase  the  price  of  the  finished 
product.  But  Mr.  Roberts  fails  to  state  that  the  same 
Capitalistic  Entrepreneurs  who  own  the  important  indus¬ 
tries  also  have  a  monopoly  on  the  raw  materials — and  that 
prices  are  fixed  by  them  for  the  raw  materials,  and  the 
finished  products  independently  of  the  wages  paid  to  the 
workers.  And  that  quantity  prices  of  raw  material  and 
finished  product  have  been  increased  far  in  excess  of  the 
quantity  increase  in  the  wages  of  the  workers.  And  since 
freight  rates  seem  to  play  so  conspicuous  a  part  in  the 
price  of  materials  and  products  —  and  therefore  living 
costs — it  may  not  be  amiss  to  emphasize  here  that  the 
same  group  that  controls  the  industries  and  raw  materials, 
also  controls  the  railroads. 

The  Unassailable  Fact  Stated 

I  think  I  have  shown  to  anyone  disposed  to  be  fair,  that 
the  quantity  increase  in  wages  is  not  responsible  for  the 
quantity  increase  in  the  prices  of  living  commodities,  or 
commodities  in  general.  In  the  first  place  prices  went 
up  first;  wages  were  increased  afterwards  (and  generally 
under  compulsion)  merely  to  enable  wage  earners  to  meet 
the  advance  in  living  costs.  Moreover,  for  every  one  dollar 
increase  in  wages,  living  costs  went  up  not  less  than  two 
dollars.  Under  these  circumstances  the  injustice  and  the 
absurdity  of  blaming  Labor  for  increases  in  living  costs  is 
obvious. 


CHAPTER  XXVI 

The  Cost  of  Living  Basis  of  Wages 


T  one  of  the  Chicago  theatres  recently,  several  sheep 


appeared  on  the  stage  in  one  of  the  scenes  of  the 


JL  -m.play.  During  the  day  these  sheep  were  kept  in  the 
lobby  of  the  theatre  as  an  advertisement.  Everybody  who 
passed  that  theatre  in  the  course  of  a  day,  paused  for  a 
moment,  or  perhaps  only  turned  his  or  her  head  to  glance 
at  the  sheep — a  unique  sight  in  a  crowded  city.  The  sheep 
received  no  wages  or  salary,  neither  for  the  part  they 
played  on  the  stage,  nor  for  their  advertising  value  or 
power.  They  received  nothing  but  their  upkeep.  And 
this  is  precisely  the  case  with  the  wage  earners  whose  wages 
are  computed  on  the  “cost  of  living’’  basis.  The  average 
man  or  woman  who  works  is  allowed  nothing  more  than  his 
or  her  upkeep — clothing,  food,  shelter.  A  mere  living  is 
all  that  is  grudgingly  allowed  to  those  who  labor  for  a 
wage.  The  sheep’s  owner  has  an  advantage,  in  that  the 
upkeep  of  sheep  embraces  only  the  items  of  food  and  shel¬ 
ter  ;  nature,  not  their  keeper,  provides  them  with  clothing. 


The  Servitude  of  the  Workers 


The  principle  of  basing  wages  upon  cost  of  living  is 
traceable  all  through  economic  history.  For  many  cen¬ 
turies  the  economic  line  of  demarkation  was  sharply  drawn 
between  master  and  slave.  To  the  masters  belonged  the 
earth  and  all  it  brought  forth  through  the  labor  of  their 
slaves,  their  bondmen,  their  serfs,  their  servants.  All 
property,  all  rights,  all  authority,  all  power,  was  vested  in 
the  hands  of  a  few,  to  whom  belonged  the  land,  the  riches 
and  the  treasures;  the  offices,  the  honors,  and  the  emolu¬ 
ments.  The  right  of  the  few  to  rule,  to  govern,  to  com¬ 
mand,  to  take,  to  own,  to  control,  was  never  questioned  by 
the  poor.  There  is  no  sense  in  denying  that  from  the  be- 


356 


Cost  of  Living  Basis  of  Wages  357 


ginning  of  what  it  pleases  ns  to  call  civilization,  society  was 
founded  on  slavery.  Servitude  was  universally  considered 
as  the  natural  state  of  the  poor ;  misery  and  wretchedness 
as  their  normal  condition ;  hardships  and  suffering  as  their 
portion  by  ancient  heritage.  A  bare  existence  was  all  that 
was  allowed  them ;  it  was  all  they  expected,  and  they  were 
disposed  to  be  grateful  even  for  that. 

Taking  it  all  in  all,  it  is  not  strange  that  those  who  had 
grown  rich  and  become  powerful  through  the  toil  of  others, 
and  who  were  accustomed  to  keep  for  themselves  the  entire 
usufruct  of  labor,  did  not  readily  accept  the  idea  of  re¬ 
warding  those  who  in  former  times  had  served  them  without 
any  recompense  whatever.  Nor  is  it  remarkable  that  when 
the  absolute  necessity  of  rewarding  those  who  toiled  had  to 
be  recognized,  the  same  old  principle  of  allowing  those 
who  labor  just  enough  recompense  to  enable  them  to  live, 
was  applied. 

Wages  Around  A.  D.  1650 

Adam  Smith,  the  first  edition  of  whose  noted  work,  *  ‘  The 
Wealth  of  Nations,”  was  published  in  1776,  writing  “Of 
the  Wages  of  Labor,”  relates  that: 

“Lord  Chief  Justice  Hales,  who  wrote  in  the  time  of 
Charles  II,  computes  the  necessary  expense  of  a  laboring 
family,  consisting  of  six  persons,  the  father  and  mother, 
two  children  able  to  do  something,  and  two  not  able,  at 
ten  shillings  a  week,  or  twenty-six  pounds  a  year.  If  they 
cannot  earn  this  by  their  labor,  they  must  make  it  up,  he 
supposes,  either  by  begging  or  stealing.  ’  ’ 1 

It  is  not  my  purpose  to  examine  into  Adam  Smith’s 
views  with  regard  to  wages,  but  to  his  credit  be  it  said 
that  he  favored  a  liberal  wage,  not,  perhaps,  so  much  as 
a  reward  of  labor  as  on  account  of  the  advantage  that 
would  naturally  accrue  to  the  wealthy  from  the  greater 
contentment,  and  the  greater  industry  of  the  laboring 
class ;  and  particularly  because  it  encouraged  marriage 

i  Adam  Smith  says  that  Chief  Justice  Hales  “appears  to  have 
inquired  very  carefully  into  the  subject.” 


358 


The  New  Capitalism 


among  the  poor  and  stimulated  their  fecundity,  thus  in¬ 
suring  for  industry  “the  multiplication  of  laborers,”  which 
“multiplication,”  needless  to  say,  implied  cheaper  labor 
and  consequently  bigger  profits  for  those  who  owned  both 
the  capital  and  the  wealth. 

The  “Law”  of  Wages  as  Stated  by  Ricardo 

Ricardo,  whose  “Principles  of  Political  Economy  and 
Taxation”  was  published  in  1817,  is  considered  to  have 
been  the  first  to  formulate  the  principles  underlying  the 
law  of  wages.  He  says  (Chapter  V),  in  his  discussion  on 
“Wages” : 

“The  power  of  the  laborer  to  support  himself,  and  the 
family  which  may  be  necessary  to  keep  up  the  number  of 
laborers,  does  not  depend  on  the  quantity  of  money  which 
he  may  receive  for  wages,  but  on  the  quantity  of  food, 
necessaries  and  conveniences  become  essential  to  him  from 
habit,  which  that  money  will  purchase.  The  natural  price 
of  labor,  therefore,  depends  on  the  price  of  food,  necessaries 
and  conveniences  required  for  the  support  of  the  labourer 
and  his  family.  With  a  rise  in  the  price  of  food  and  neces- 
aries,  the  natural  price  of  labor  will  rise;  with  the  fall  in 
their  price  the  natural  price  of  labor  will  fall.  ’  ’ 2 

According  to  the  Economists — ' Tis  an  Iron  Law 

The  writings  of  Adam  Smith  and  his  contemporaries  in 
the  eighteenth  century,  and  those  of  Ricardo  and  his  dis¬ 
ciples  in  the  nineteenth  century,  have,  with  such  modifica¬ 
tions  and  adaptations  as  became  necessary  by  changes, 
been  accepted  as  representative  and  standard  by  the  en¬ 
tire  group  of  political  economists  of  the  twentieth  cen¬ 
tury.  This  is  particularly  true  with  whatever  concerns 
the  laboring  class,  and  as  regards  the  subject  of  their 
wages.  As  a  consequence  the  relative  economic  condition 
of  the  workmen  of  today  is  in  no  wise  an  improvement 
over  the  economic  condition  of  the  laborer  who  lived  in 
the  time  of  Charles  II.  Wages,  relative  to  living  costs, 

2  Ricardo  also  says :  “There  is  no  other  way  of  keeping  profits 
up,  but  by  keeping  wages  down.” 


Cost  of  Living  Basis  of  Wages  359 


are  no  greater  than  the  wages  of  the  laborer  of  two  or 
three  centuries  ago. 

The  Old  Wage  Law  in  Modern  Clothes 

Dogberry  has  said  that  “comparisons  are  odorous, ”  and 
indeed  they  are  sometimes,  but  if  so  it  is  because  the  things 
compared  themselves  are  foul.  Yet  comparisons,  if  made 
in  a  spirit  of  fairness,  are  often  illuminating,  if  not  edi¬ 
fying.  Let  us  attempt  a  comparison  between  the  laboring 
family  which  around  the  middle  of  the  seventeenth  cen¬ 
tury  received  a  recompense  of  twenty-six  pounds  a  year, 
and  w'hose  necessary  living  expenses  were  computed  at  ten 
shillings  a  week — and  the  laborer  (and  his  family)  of  more 
modern  times.  If  it  is  permissible,  for  the  sake  of  conveni¬ 
ence,  to  account  the  value  of  the  pound  at  around  five 
dollars  in  our  money,  then  the  seventeenth  century  com¬ 
mon  laborer  and  his  family  received  a  yearly  wage  amount¬ 
ing  to  $130 — which  was  then  considered  a  sufficient  amount 
for  a  family  of  six.  Evidently  the  $130  was  not  an 
average  income  for  all  families;  it  would  seem  that  the 
earnings  in  many  cases  were  not  sufficient  to  meet  the 
necessary  living  costs,  for  we  are  told  that  “if  they  can¬ 
not  earn  this  by  their  labor,  they  must  make  it  up,  either 
by  begging  or  stealing.”3 

How  does  this  amount  of  wages  paid  in  1650  in  England, 
compare  with  the  amount  of  earnings  of  American  artisans 
two  centuries  later  in  the  United  States  ?  From  the  sundry 
statistical  records  I  have  examined  I  can  but  conclude  that 
there  is  no  unity  of  agreement  as  regards  the  amount  of 
wages  paid  in  the  United  States  in  the  first  half  of  the 
nineteenth  century.  Even  those  computations  for  the  sec¬ 
ond  half  are  based  on  partial  statistics  or  incomplete  data 
for  certain  industries.  Wherever  we  may  find  them,  from 
whatever  source  they  may  have  been  derived,  or  however 
they  may  have  been  computed,  no  scientific  value  attaches 

3  The  chronic  inadequacy  of  the  wages  of  English  laborers  for 
the  necessaries  of  life  is  repeatedly  observed  by  James  E.  Thorald 
Rogers  in  his  work  “Six  Centuries  of  Work  and  Wages.” 


360 


The  New  Capitalism 


to  them.  They  are  at  best  approximations,  in  many  cases 
guesses,  but  the  best  available. 

According  to  Professor  Willford  Isbell  King,  the  average 
yearly  money  wages  per  man  were  as  follows:  (Table 
XXXI,  p.  168.) 


Census  Years  Average  Money  Wage 

1850 . $  204 

1860 .  265 

1870 .  397 

1880 .  323 

1890 .  398 

1900 .  417 

1910 .  507 

1915 .  600  4 

1920 .  1200  4 


My  own  data  and  computations  would  lead  me  to  believe 
that  Professor  King's  statistics,  especially  for  the  years 
1850  to  1900,  are  rather  low  as  an  average  for  all  workers. 
However,  I  am  quite  willing  not  to  press  my  own  findings, 
preferring  to  accept  those  of  a  recognized  authority. 

It  is  to  be  noted  here  that  in  point  of  quantity  the  wages 
of  an  American  wage  earner  in  1850  were  less  than  a  hun¬ 
dred  dollars  higher  than  the  income  of  an  English  laborer’s 
family  in  1650.  The  contrast  in  economic  and  industrial 
conditions  between  1650  and  1850  is  so  great  that  a  com¬ 
parison  is  impossible,  and  I  shall  attempt  none.  The  one 
point  I  want  particularly  to  emphasize  here  is  that  wages 
have  always  advanced  at  a  slow  rate.  To  illustrate  this  let 
us  take  the  “family”  income  of  the  English  laborer  of  1650 
and  the  family  income  in  the  United  States,  which  in  1850, 
according  to  Professor  King,  was  $535.  Consequently  the 
increase  has  been  at  the  cumulative  rate  of  about  two  dol¬ 
lars  a  year. 

I  shall  leave  this  subject  at  this  point,  merely  wishing  to 
say  that  when  we  consider  wage  increases  it  will  be  observed 
that  the  quantity  of  wages  increased  at  a  rather  conserva- 

4  Professor  Friday,  in  his  book  “Profits,  Wages  and  Prices”  says 
that  wages  had  risen  by  1919,  so  that  the  average  wages  will  prob¬ 
ably  exceed  $1,300  per  annum,  or  more  than  twice  the  average  wages 
of  1914.  The  money  wage  for  1915  and  1920  is  a  compromise  estimate 
of  conflicting  computations  made  by  .various  “authorities.”  I  con¬ 
sider  it  a  liberal  estimate. 


Cost  of  Living  Basis  of  Wages  361 


tive  rate ;  always  after  the  living  costs  had  advanced ;  and 
always  lagging  away  behind  the  quantity  increases  in  living 
costs.  Generally  speaking — since  1900,  for  every  dollar 
increase  in  wages,  living  costs  advanced  two  dollars. 

Wage  Increases  Altvays  Inadequate 

That  is  the  one  lesson  we  learn  from  a  study  of  statistics, 
particularly  when  each  person  correlates  them  with  his 
own  experiences  and  observations.  All  through  the  years, 
particularly  during  the  past  twenty-five  years,  living  ex¬ 
penses  rose  first,  and  wages  generally  under  compulsion, 
were  reluctantly  advanced  later  to  enable  those  most  con¬ 
cerned  to  meet  the  mounting  living  costs.  Never  (with  the 
possible  exception  of  the  years  from  1917  to  1920)  were 
wage  increases  equal  to  the  living  cost  increases  that  had 
preceded.  In  1919,  when  wages  had  reached  their  zenith, 
the  average  wages  per  worker  were  considered  as  between 
$1200  to  $1300.  In  November  of  1919  the  Bureau  of 
Applied  Economics  (Washington,  D.  C.)  computed  that 
“the  annual  cost  of  maintaining  a  family  of  five  at  a  mini¬ 
mum  of  subsistence  level  at  prices  prevailing  in  the  latter 
part  of  1919,  was  approximately  $1575.  ”5 

Two  Important  Points 

With  regard  to  the  wage  increases  made  during  the  years 
1917-20,  I  have  examined  and  computed  hundreds  of  sets 
of  statistics  that  have  come  to  me  regularly  from  the  vari¬ 
ous  departments  of  the  Government,  and  hundreds  of  pri¬ 
vate  compilations  of  hundreds  of  sets  that  appeared  in  the 
leading  trade,  industrial  and  financial  publications ;  besides 
sundry  works  dealing  with  economic  questions,  and  a  num¬ 
ber  of  corporation  reports.  To  save  the  readers’  time,  and 
space  in  this  book,  I  will  briefly  summarize  my  findings 
and  conclusions  with  regard  to  that  group  engaged  in  the 
manufacturing  industries. 

I.  The  average  wage  around  1915  was  less  than  $600  a 

5  In  the  April  Number,  1922,  of  the  “Monthly  Labor  Review”  pub¬ 
lished  by  the  U.  S.  Department  of  Labor,  we  are  given  the  informa¬ 
tion  that  the  yearly  increases  of  miner’s  families  averaged  only 
$1,590.65  while  the  average  expenditures  per  family  was  $1,705.86. 


362 


The  New  Capitalism 


year  per  worker.  According  to  Professor  Friday,  who  has 
made  a  fairly  thorough  inquiry  into  the  subject,  and  whose 
computations  are  based  on  the  latest  available  statistics  up 
to  the  beginning  of  1920,  “The  annual  wages  in  1914  of 
employees  of  manufacturing  corporations  were  $685  per 
employe.”  It  is  to  be  observed,  however,  that  Professor 
Friday’s  figures  include  industrial  wage  workers  and  sal¬ 
aried  employees  within  the  industries.  According  to  the 
Census  Statistics  there  were  in  1914  in  the  various  manu¬ 
facturing  industries,  7,036,337  wage  earners,  whose  total 
wages  were  $4,079,332,433 — an  average  of  $580  per  worker. 

2.  The  sundry  increases  in  wages,  since  1914 ,  even 
granting  that  they  would  have  increased  wages  100  percent, 
did  not  yield  an  average  wage  for  all  industrial  workers  of 
$ 1200  a  year. 

This  figure  was,  beyond  a  doubt,  exceeded  by  some  work¬ 
ers  in  certain  industries,  but  it  is  not  an  average  for  all 
workers  in  all  industries. 

Deceptive  Statistics 

As  a  matter  of  fact  the  average  increase  fell  below  100 
percent.0  True,  in  many  instances  I  have  seen,  the  increase 
of  total  wages  in  cities  and  states  exceed  100  percent — but 
this  is  offset  by  the  fact  that  the  increased  volume  of  wages 
was  distributed  among  a  greater  number  of  workers,  the 
division  yielding  often  an  average  of  less  than  a  thousand 
dollars  per  worker.  For  example,  in  the  city  of  Wilming¬ 
ton,  Delaware  :6 7 

In  1914  the  average  number  of  wage  earners  was  15,048 ; 
and  the  aggregate  wages  was  $8,674,000. 

In  1919  the  average  number  of  wage  earners  was  21,414; 
and  the  aggregate  wTages  was  $19,352,000.  An  increase  in 
wages  of  123.1  percent. 

6  In  its  Bulletin  No.  274  the  Bureau  of  Labor  statistics  gives 
the  “Union  Scale  of  Wages  and  Hours  of  Labor,  May  15,  1919.”  Its 
report  is  based  on  “912,000  union  workers  in  the  organized  trades  and 
occupations  of  61  of  the  principal  cities  of  the  United  States.”  “In 
all  trades  taken  collectively  the  income  in  weekly  wage  rates  on 
May  15,  1919,  was  J/3  percent  over  1913. 

7  The  statistics  are  those  of  the  Department  of  Commerce,  pub¬ 
lished  by  the  Bureau  of  the  Census. 


Cost  of  Living  Basis  of  Wages  363 

That  sounds  big,  but  when  actually  computed  we  find 
that  in  1914  the  average  wage  per  worker  was  $577,  and  in 
1919  it  was  $900.  It  must  be  apparent  to  all,  that  in  spite 
of  the  123.1  percent  wage  increase  for  1919  it  was  $675 
below  the  minimum  subsistence  level. 

Or  let  us  take  a  state — Rhode  Island,  for  example.  The 
statistics  are  as  follows : 

1914  1919  Percent  of 

Increase 

Wage  earners  113,425  139.665  23.1 

Wages  $59,366,000  $137,671,000  131.9 

But  when  wages  are  computed  wTe  find  that  in  1914  they 
were  $523  per  worker,  and  in  1919,  $987  per  worker,  a 
money  increase  of  $464,  or  an  increase  of  89  percent. 

There  is  but  one  obvious  conclusion ;  the  workers  were 
decidedly  underpaid  in  1914;  nor  was  their  relative  condi¬ 
tion  improved  in  1919.  In  all  cases — for  all  cities  and 
states — the  large  percentage  increase  in  wages,  computed 
in  dollars  and  cents,  did  not  begin  to  enable  them  to  meet 
the  large  money  increase  in  the  cost  of  living.  As  already 
pointed  out,  the  only  thing  that  saved  the  situation  for  all 
wage  earners  was  the  fact  that  in  a  majority  of  cases  more 
than  one  worker  contributed  to  the  support  of  a  family. 

Statistical  Wages  of  Steel  Workers 

The  United  States  Steel  Corporation  is  supposed  to  have 
paid  the  highest  wages  to  industrial  workers,  particularly 
during  the  period  of  the  war.  One  writer,  Edward  A. 
Bradford,  says:  ‘‘Never  were  such  wages  paid  as  now. 
Some  manual  workers  in  the  steel  industry  earn  $10,000 
a  year.  ”8 

Professor  David  Friday  says:  “The  average  wage  per 
man  in  the  United  States  Steel  Corporation  was  $905  in 
1914,  $1,042  in  1916,  and  $1,902  in  1919.” 

It  is  to  be  regretted  that  Professor  Friday  did  not 
explain  at  the  same  time  that  the  ten  and  twelve-hour  day 

8  The  Annalist,  January  28,  1918.  Is  it  permissible  to  ask  Mr. 
Bradford :  “How  many  wage  workers  in  the  steel  industry  earned 

$10,000  a  year?” 


364  The  New  Capitalism 


was  still  in  force  for  a  considerable  number  of  employees  in 
the  plants  of  the  United  States  Steel  Corporation,  and  that 
the  figures  he  gives  are  not  wage  rates  but  actual  earnings, 
i.  e.y  all  wages  received  including  overtime. 

The  following  news  item,  published  in  the  Chicago 
Tribune,  August  2,  1921,  sheds  light  on  the  wages  paid  to 
the  workers  in  the  United  States  Steel  Corporation  plants : 

“New  York,  Aug.  19,  1921. —  (Special) — The  United 
States  Steel  Corporation  today  announced  another  adjust¬ 
ment  in  the  wages  of  its  employees,  the  third  to  be  put  into 
effect  since  the  decline  in  steel  prices  began.  .  .  . 

“The  official  announcement  made  by  Elbert  H.  Gary, 
chairman  of  the  board  of  directors,  follows: 

“  Tn  view  of  the  prevailing  low  selling  price  of  steel  as 
compared  with  costs  of  production,  it  is  necessary  to  make 
reductions  in  wage  rates,  and  therefore  we  will  recom¬ 
mend  to  subsidiary  companies  that  the  general  rates  of  day 
labor  be  decreased  to  thirty  cents  per  hour,  to  become 
effective  Monday,  August  29,  and  that  other  wages  and 
salaries  be  equitably  adjusted.’  ”... 

The  following  Table  shows  wages  of  unskilled  labor  after 
each  advance  in  wages  since  1915,  the  percentage  of  each 
advance  and  the  cumulative  advance  of  each,  with  statistics 
for  the  last  three  adjustments: 


1915 

10  hr.  day 
$2.00 

Advance 

Percent  Advance 

Feb.  1,  1916 

2.20 

10.0 

10.0 

May  1,  1916 

2.50 

13.6 

25.0 

Dec.  15,  1916 

2.75 

10.0 

37.5 

May  1,  1917 

3.00 

9.0 

50.0 

Oct.  1,  1917 

April  16,  1918 

3.30 

10.0 

65.0 

4.80 

15.0 

90.0 

Aug.  1,  1918 

4.20 

10.5 

110.0 

Oct.  1,  1918 

4.62 

10.0 

131.0 

Feb.  1,  1920 

5.06 

10.0 

153.0 

May  16,  1921 

4.05 

*20.0 

'  102.0 

July  16,  1921 

3.70 

t  9.5 

85.0 

Aug.  29,  1921 

3.00 

*18.9 

50.0 

*  Reduction. 

t  Elimination  of  time  and  a  half  for  overtime  work  over  eight 
hours. 


Cost  of  Living  Basis  of  Wages  365 


It  is  to  be  remembered  that  in  spite  of  recent  modifica¬ 
tions  the  ten  and  twelve-hour  day.  is  still  in  force  in  the 
several  plants  of  the  United  States  Steel  Corporation.  The 
twelve-hour  day  is  still  defended  by  Mr.  Gary  as  impos¬ 
sible  of  abrogation.  If  the  earnings  per  worker  in  1919, 
amounting,  according  to  Professor  Friday,  to  $1902,  were 
computed  at  the  highest  rate  ever  paid,  viz.,  about  fifty 
cents  an  hour,  it  will  be  found  that  the  average  steel  worker 
worked  approximately  twelve  hours  a  day  in  order  to  earn 
$1902. 

At  the  wage  rate  of  August  29,  1921 — $3.00  for  a  ten- 
hour  day,  or  thirty  cents  an  hour — a  steel  worker  working 
eight  hours  a  day  and  three  hundred  days  a  year,  would 
earn  $750  a  year.  But  there  has  been  no  material  decrease 
in  living  costs.  Despite  the  much  advertised  decrease  in 
the  wholesale  prices  of  some  commodities,  the  retail  prices 
have  remained  singularly  inflexible.  And  for  many  com¬ 
modities  the  quality  has  been  lowered  to  such  an  extent  as 
to  necessitate  purchasing  double  the  former  quantity.  On 
an  average,  especially  when  we  include  the  item  of  Rent, 
the  $1575  considered  necessary  for  a  mere  subsistence,  is 
just  as  necessary  today  as  it  was  in  1910. 

“ The  End  of  a  Perfect  Day” 

But  granting  for  the  present  that  the  wage  earners  for 
a  period  of  two  or  three  years  were,  indeed,  “in  clover 
that  the  wages  they  received  were  the  highest  that  had  ever 
been  paid  them  in  the  history  of  the  world ;  and  that  wages, 
considering  that  an  average  family  draws  its  support  from 
more  than  one  worker,  were  more  nearly  adequate,  per¬ 
haps  even  in  some  instances  more  than  adequate,  to  meet 
even  the  considerably  higher  living  costs — granting  all 
that,  and  anything  you  may  care  to  add  in  order  to 
bolster  your  possible  contention  that  the  wage  earners’ 
condition,  especially  during  the  years  1917-1920  was  ex¬ 
cellently  fine;  granting  aught  you  might  say  on  this  sub¬ 
ject — I  will  put  a  deadly  period  to  your  sentence  by  de¬ 
claring  that  the  brief  season  of  the  wage  earners’  glory  is 


366 


The  New  Capitalism 


permanently  over;  and  that  all  the  Capitalistic  machinery 
is  in  full  motion  to  take  away  from  them  every  temporary 
advantage  that  might  have  been  grudgingly  granted  them 
under  stress  of  extraordinary  circumstances ;  and  that 
within  another  few  years  all  wage  earners  and  families 
of  wage  earners,  will  find  themselves  precisely  in  the  same 
economic  condition  they  were  in  in  former  times;  nay, 
they  will  probably  be  worse  off  than  ever  before. 


The  Plight  of  the  Salaried  Employees 


I'll  go  a  step  further  and  say  that  after  the  Capitalistic 
Entrepreneur  “readjustment”  will  have  been  completed, 
not  only  the  industrial  wage  earners  but  all  workers — all 
non-investors — will  find  it  increasingly  harder  to  make 
ends  meet  than  ever  before. 

It  is  rather  singular  that  nearly  all  writers  who  have 
essayed  to  deal  with  the  subject  of  wages  and  living  costs, 
base  all  their  conclusions  on  computations  regarding  wages 
paid  to  industrial  workers.  And  yet  there  are  many  mil¬ 
lions  more  who  are  in  the  group  known  as  salaried  work¬ 
ers,  for  whom,  as  well  as  for  the  industrial  workers,  there 
have  been  two  separate  100  percent  increases  in  living 
costs,  but  for  most  of  them  there  has  been  no  proportionate 
increase  in  salary. 

To  illustrate  what  I  mean  suppose  we" take  the  statistics 
for  the  salaried  officials,  clerks  and  so  forth,  in  the  manu¬ 
facturing  industries  as  given  in  the  1920  Statistical  Ab¬ 
stract  (Table  No.  447,  page  804)  ;  those  for  1919  are  from 
the  Department  of  Commerce  Summary  of  Manufactures. 


Salaried  Officials,  Salaries 


Clerks,  etc. 

1899 

364,120 

$  380,771,321 

1904 

519,556 

574,439,322 

1909 

790,267 

938,574,967 

1914 

964,217 

1,287,916,951 

1919 

1,447,761 

2,893,046,000 

Average  Salary 
Per  Person 
$1045 
1106 
1188 
1136 
1998 


Please  remember  that  from  1896  to  1914 — the  cost  of 
living  advanced  100  percent;  to  meet  which  the  salaried 
workers,  as  the  above  statistics  indicate,  had  an  average 


Cost  of  Living  Basis  of  Wages  367 


increase  of  less  than  a  hundred  dollars.  From  1914  to 
1920  there  was  another  distinct  100  percent  increase  in 
living  costs,  and  an  increase  of  only  $862  in  salaries. 

I  have  no  intention  of  going  into  an  analysis  of  salaries 
as  distinguished  from  wages.  To  do  so  in  any  worth-while 
manner  would  require  many  pages.  My  reason  for  calling 
attention  to  this  consistently  ignored  phase  of  the  subject 
at  this  time  is  to  emphasize  that  ordinarily  when  we  speak 
of  wages  as  having  gone  up  100  or  more  percent  during 
the  past  five  or  six  years,  the  increase  is  applicable  to  a 
limited  number  of  wage  earners  only.  It  is  true,  let  us 
say,  for  eight  or  ten  million,  but  it  is  not  true  for  fully  as 
many  others  who  statistically  are  not  accounted  as  wage 
earners.  According  to  the  Monthly  Labor  Review  (March, 
1922)  published  by  the  United  States  Department  of  Labor, 
the  per  capita  salaries  increased  only  50  percent  during 
the  five-year  period  1914-1919.  Yet  the  increase  in  the 
living  expenses  of  these  salaried  employees  during  that 
period ,  was  fidly  100  percent. 

If  we  lump  salaries  and  wages,  and  particularly  if  we 
subtract  from  the  total  salary  roll  the  enormous  salaries 
of  officials  and  principals,  in  which  the  average  small  sal¬ 
aried  person  shares  only  statistically,  it  will  be  found,  I 
believe,  that  the  average  money  increase  in  the  pay  per 
worker  was  considerably  less  than  the  money  increase  in 
living  costs.  I  doubt  whether  the  average  increase  from 
1914  to  1919  in  wages  and  salaries  per  worker ,  would  ex¬ 
ceed  60  percent.  But  remember  that  the  increase  in  the 
cost  of  living  was  100  percent  for  100  percent  of  the  work¬ 
ers — whether  wage  earners  or  salaried  employees.  It  is 
clear  that  this  subject  concerns  the  salaried  men  and 
women  even  more  than  the  so-called  wage  worker. 

Looking  Ahead 

But  what  was  yesterday  is  of  less  importance  than  what 
will  be  tomorrow.  Therefore,  let  us  determine  what  the 
economic  condition  of  the  non-investors  will  be  after  the 
Capitalistic  Entrepreneurs  will  have  completely  ‘ 1  adjusted” 


368 


The  New  Capitalism 


wages  and  salaries.  I  shall  try  to  give  the  readers  a  simple 
and  easily  comprehended  answer. 

For  the  present  I  will  overlook  the  fact  that  the  cost  of 
living  increased  from  1896  to  1914  a  round  100  percent, 
and  that  wages  were  not  increased  in  proportion.  In  order 
to  simplify  my  contention  I  am  going  to  proceed  for  the 
present  as  if  the  increase  in  wages  and  salaries  from  1896 
to  1914  had  kept  pace,  dollar  for  dollar,  with  the  increase 
in  the  cost  of  living.  In  which  event  I  am  assuming  that 
in  1914  the  average  family  wage  income  of  the  average 
wage  earner  and  salaried  employee,  sufficed  to  enable  them 
to  meet  the  prevailing  costs  of  living.  Consequently  wTe 
may  express  it  thus :  In  1914  one  dollar  of  wages  or  salary 
was  equal  to  one  dollar  of  living  cost.- 

Wages  1914  Living  Cost 

$1.00  $1.00 

Then  prices  began  to  ascend  rapidly,  so  that  the  living 
costs  in  1920  were  100  percent  higher  than  in  1914.  It  is 
to  be  emphasized  here  that  the  100  percent  increase  in  the 
living  costs  is  predicable  of  100  percent  of  the  population. 
But  most  of  those  working  for  a  wage  or  salary  are  un¬ 
organized,  and  only  those  who  are  organized  succeeded  in 
compelling  a  material  increase  in  their  wages.  Let  us  say 
that  in  the  aggregate  the  increase  in  wages  and  salaries, 
if  distributed  among  all  the  wage  and  salary  workers,  was, 
in  round  numbers,  60  percent.  That  is  to  say,  for  every 
dollar  of  wages  the  average  wage  earner  or  salaried  man  or 
woman  received  in  1914,  he  or  she  received  $1.60  in  1920, 
whereas  the  one  dollar  living  cost  of  1914  had  risen  to  two 
dollars  by  1920.  The  formula  may  then  be  expressed  as 
follows : 

Wages  Living  Cost 

1914 _ $1.00  1914 $1.00 

1920 _  1.60  1920 _ 2.00 

Capitalistic  Unwillingness  to  Lower 

Living  Costs 

The  Capitalistic  campaign  which  is  still  in  full  swing, 
has  certain  clearly  defined  objects  in  view.  First  of  all  it 


Cost  of  Living  Basis  of  Wages  369 


was  inevitable  that  the  prices  of  some  commodities  should 
fall.9  But  it  is  apparent  to  those  who  study  price  sched¬ 
ules,  that  those  who  have  been  the  beneficiaries  of  big 
profits  from  high  prices  will  not  permit  prices  to  fall  to 
the  1914  level.  Hundreds  of  statements  of  public  speakers, 
writers,  bankers,  merchants,  statesmen,  government  offi¬ 
cials,  et  al.,  could  be  quoted  here  to  show  the  declared 
determination  and  avowed  purpose  of  the  Capitalistic 
group  that  prices  of  commodities  shall  not  go  back  to  the 
1914  level.  A  few  will  suffice  as  pointing  a  moral,  as  well 
as  adorning  a  tale.  For  example : 

Elbert  H.  Gary,  of  the  United  States  Steel  Corporation, 
declared  repeatedly  during  1920  and  1921,  that  steel  prices 
would  not  come  down.  Since  his  last  utterance  steel  prices 
have  been  lowered,  but  they  are  still  far  above  the  1914 
prices.10 

Henry  C.  Wallace,  the  new  Secretary  of  Agriculture,  in 
his  first  public  statement,  said :  ‘  ‘  This  talk  of  bringing 

prices,  whether  farm  prices  or  other  prices,  back  to  the 
pre-war  normal,  is  morally  wrong  and  economically  impos¬ 
sible.”  In  a  later  statement  Secretary  Wallace  repeated 
the  above  utterance  with  a  few  more  trimmings:  “We  can 
pay  off  our  debts  much  easier  if  we  maintain  a  price  level 
more  nearly  the  level  at  which  the  debts  were  incurred.” 

Col.  John  P.  Wood,  of  Philadelphia,  (President  of  the 
American  Woolen  Co.)  appearing  before  the  Finance  Com¬ 
mittee  having  the  Fordney  Emergency  Tariff  Bill  under 
consideration,  on  behalf  of  the  wool  manufacturers  said 
that  the  government  had  been  “unwise”  in  promulgating 
a  campaign  against  high  prices. 

The  Manufacturers  Record,  which  blames  the  Federal 

9  While  beyond  a  doubt  some  of  the  wholesale  prices  of  com¬ 
modities  were  lower  in  price  in  1921  than  they  were  in  1919,  and 
1920,  nevertheless  the  increase  in  the  item  of  Rent  has  robbed  the 
average  man  or  woman  of  whatever  advantage  might  be  derived 
from  lower  commodity  prices.  The  aggregate  “living  costs”  remain 
about  the  same,  the  difference  being  that  a  greater  proportion  goes 
to  the  Capitalist  in  the  role  of  landlord  and  a  smaller  proportion  to 
the  Entrepreneur  in  the  role  of  commodity  producer,  manufacturer 
or  dealer. 

10  Steel  prices  are  again  in  the  ascendent. 


370  The  New  Capitalism 

Reserve  Bank  for  price  reductions,  in  its  issue  of  Febru¬ 
ary  24,  1921,  said:  “The  war  of  the  Federal  Reserve  Bank 
to  break  down  prices  and  prosperity  was  a  crime  against 
civilization,”  etc. 

(Parenthetically  let  me  say  that  I  could  give  hundreds 
of  quotations  from  the  writings  and  speeches  of  bankers, 
merchants,  statesmen,  etc.,  saying  in  effect  that  wages  must 
come  down  nearer  to  the  pre-war  basis.) 

The  New  Level  of  Prices  and  Wages 

At  any  rate  my  guess  (it  is  more  than  a  guess,  but  so  as 
not  to  be  compelled  to  enter  into  a  lengthy  discussion  I’ll 
call  it  simply  a  guess) — my  guess  is  that  the  new  level  of 
prices  will  be  fixed  about  midway  between  the  prices  of 
1914  and  1920 ;  that  is  to  say :  the  article  that  cost  $1.00  in 
1914,  and  had  risen  to  $2.00  by  1920,  will  cost  $1.50  from 
now  on. 

On  the  other  hand  the  Capitalistic  campaign  contem¬ 
plates  bringing  down  wages  and  salaries  as  near  as  possible 
to  the  1914  level.  From  the  wage  cuts  made  thus  far  for 
the  various  kinds  of  labor,  (reductions  ranging  from  10  to 
25  percent  for  skilled  labor,  and  from  25  to  50  percent  for 
unskilled  labor)  I  compute  that  the  cut  in  wages  and  sal¬ 
aries  will  average  25  percent  for  all  workers — wage  earners 
and  salaried  men  and  women.  That  is  to  say,  the  wage 
earners  and  salaried  men  and  women  will  have  their 
average  1920  wage  of  $1.60  cut  25  percent,  which  will 
leave  them  $1.20  or  twenty  cents  more  for  every  dollar  of 
wages  over  the  wages  of  1914.  The  formula  now  reads  as 
follows : 

Wages  Living  Cost 


1914 .  $1.00  $1.00 

1920  .  1.00  2.00 


1922  and  thereafter .  1.20  1.50 

This,  I  think,  is  a  result  that  the  average  wage  earner 
and  the  moderate  salaried  man  and  woman  can  verifv  with 
actual  figures  as  pertaining  to  themselves.  To  bring  the 
whole  subject  nearer  to  the  actual  figures,  let  us  say  that 


Cost  of  Living  Basis  of  Wages  371 


the  average  weekly  wage  of  the  average  worker  in  1914  was 
$20.00,  and  that  this  amount  enabled  him  or  her  to  just 
meet  the  cost  of  living.  The  formula  then  reads  as  follows : 

Wagea  Living  Cost 

1914  . $20.00  1914  . $20.00 

1920  increase  60% .  32.00  1920  increase  100%...  40.00 

1922  decrease  25% .  24.00  1922  decrease  25% 30.00 

Here  you  have  the  arithmetic  of  the  prices  and  wages 
situation  as  it  will  be  from  now  on,  about  as  clearly  as  it 
can  be  expressed  when  averages  are  employed. 

The  Old  Level  of  Profits 

The  Capitalistic  campaign,  however,  includes  another 
fixed  purpose,  not  observable  on  the  surface.  If  the  Cap¬ 
italistic  Entrepreneurs  can  succeed  in  stabilizing  com¬ 
modity  prices  midway  between  1914  and  1920,  so  that  they 
will  receive  henceforth  $1.50  instead  of  $1.00  as  in  1914; 
and  lowering  wages  down  to  a  point  where  they  will  pay 
$1.20  for  labor  for  which  they  paid  only  $1.00  in  1914,  it  is 
clear  that  they  will  enjoy  a  margin  of  profit  considerably 
in  excess  of  that  they  reaped  in  1914.  But  that  is  not 
enough  to  satisfy  the  Capitalistic  Entrepreneurs ;  they  will 
not  willingly  give  up  their  maximum  war  time  profit.  If, 
therefore,  they  can  succeed  in  reducing  the  number  of 
workers,  at  the  same  time  increasing  output  per  worker ;  or 
increasing  the  number  of  hours;  or  eliminating  those  por¬ 
tions  of  their  contracts  with  labor  by  which  they  are  com¬ 
pelled  to  pay  time  and  a  half  for  over  time; — if  they  can 
succeed  in  increasing  by  one  method  or  another  Labor’s 
production,  without  an  increase  in  wages,  they  will  have 
succeeded  in  creating  a  condition  by  virtue  of  which  their 
aggregate  volume  of  profits  will  approximate  the  aggregate 
volume  of  war  time  peak  profits. 

The  Corollary 

At  the  same  time  they  will  have  created  a  condition 
which  will  have  brought  the  average  American  workman 
nearer  to  the  level  occupied  by  the  average  European 


372 


The  New  Capitalism 


workman.  The  ability  to  save  will  be  practically  taken 
away  from  the  average  man  and  woman.  The  labor  of  two 
persons  will  be  required  to  enable  the  average  family  to 
merely  subsist.  A  bare  living,  and  in  many  cases  not  even 
that,  will  be  the  rule  rather  than  the  exception.  As  Chief 
Justice  Hales  expressed  it — “If  they  (the  workers)  cannot 
earn  this  by  their  labor  they  must  make  it  up  by  begging 
or  stealing.  ”  This,  it  has  seemed  to  me  for  years,  is  the 
“ideal”  the  Capitalistic  group  is  striving  to  achieve.  I 
cannot  shake  off  the  feeling  that  there  is  this  definite  design 
behind  the  whole  Capitalistic-Mammonistic  scheme. 

If  the  Capitalistic  Entrepreneurs  succeed  in  putting 
through  their  program — and  thus  far  they  have  been  suc¬ 
cessful  in  having  their  own  way — the  American  Standard 
of  living  will  be  nearer  than  ever  to  the  European  standard 
of  living;  and  the  condition  of  the  wage  earners  and  sal¬ 
aried  employees  will,  in  a  few  years  more,  be  hopeless. 


CHAPTER  XXVII 

Wages  Under  tite  New  Capitalism 


IN  the  several  chapters  dealing  with  Wages,  I  hope  I 
have  succeeded  in  giving  an  intelligible  interpretation. 
At  any  rate,  I  think  I  have  made  clear  at  least  these 
few  things: 

1 :  That  Capital  does  not  pay  wages. 

2 :  That  Labor  pays  its  own  wages. 

3 :  That  Labor  pays  the  interest  on  its  wages. 

4:  That  a  big  quantity  wage  with  a  low  ex¬ 
change  value  (or  purchasing  power)  is  of 
no  advantage  to  the  wage  earners. 

If  these  elementary  propositions  are  tenable  it  behooves 
the  New  Order  to  bring  about  an  early  and  scientific  adjust¬ 
ment  of  the  Wages  question  under  the  New  Capitalism — 
one  that  will  give  those  who  work  a  fair  and  reasonable 
wage,  and  to  the  people  greater  benefits  and  more  advan¬ 
tages,  than  accrue  to  them  under  the  ‘  ‘  established  ’  ’  Cap¬ 
italistic  Order. 

Let  me  emphasize  once  more  that  the  important  thing 
about  wages  is  their  exchange  value.  Indeed  if  I  were 
compelled  to  choose  between  a  system  of  a  big  quantity 
wage  and  a  low  exchange  value,  or  a  less  quantity  wage 
and  high  exchange  value,  I  would,  by  all  odds,  choose  the 
latter.  But  whatever  our  views  with  regard  to  the  quan¬ 
tity,  or  the  exchange  value,  of  wages  may  be,  we  must 
accept  the  situation  as  we  find  it. 

The  Capitalistic  Entrepreneur  group  has  declared  over 
and  over,  that  anything  higher  than  a  subsistence  wage 
cannot  be  paid ; .  that  the  paying  of  wages  in  excess  of  a 
bare  living  would  mean  the  destruction  of  the  industries. 
I  hold  a  contrary  opinion ;  to  my  way  of  figuring  the  pay¬ 
ing  of  fair  and  reasonable  wages  does  not  mean  the  destruc- 


373 


374 


The  New  Capitalism 


tion  of  the  industries,  but  it  does  mean  a  material  reduction 
in  the  enormous  Capitalistic  profits,  without  which  the 
Capitalistic  -Mammonistic  Entrepreneur  System  cannot 
flourish.  However,  to  be  perfectly  fair,  we  will  take  the 
Capitalistic  Entrepreneurs  at  their  word.  We  will  accept 
as  basic  the  wage  rates  and  scales  that  may  be  in  existence 
at  the  time  we  begin  to  function. 

Our  Chief  Endeavor 

Our  chief  endeavor  will  be  to  bring  down  the  cost  of 
living.  If  we  cannot  assure  those  who  labor  of  a  larger 
quantity  recompense  for,  say  eight  hours  of  work  a  day,  we 
can  guarantee  them  a  material  reduction  in  the  prices  of 
the  things  they  must  purchase  during  sixteen  hours  a  day. 

Let  none  harbor  delusions  with  regard  to  what  we  pro¬ 
pose  to  do,  and  what  we  shall  aim  to  accomplish.  Assuming 
that  we  will  organize  into  a  compact  national  body — with 
organized  Labor  as  the  nucleus — (for  without  the  active 
help  and  co-operation  of  organized  Labor  all  efforts  will  be 
useless,  nothing  can  be  accomplished) — our  initial  aim  will 
be,  not  to  increase  wTages,  but  rather  to  bring  down  the  prices 
of  commodities — the  cost  of  living — in  brief,  to  increase 
the  exchange  value  of  wages. 

For  millions  of  families  in  the  United  States  the  present 
wage  is  not  sufficient  to  enable  them  to  meet  the  ordinary 
living  expenses.  Indeed  were  it  not  for  the  fact  that  in 
many  of  these  families  there  are  several  members  working, 
dire  poverty  would  be  their  doom.  All  the  statistics  con¬ 
clusively  show  that  the  wages  per  worker  are  considerably 
below  the  minimum  family  subsistence  level.  The  only 
thing  that  saves  the  situation  is  this  quite  accidental  fea¬ 
ture,  predicable  of  a  majority  of  families,  that  more  than 
one  person  is  at  work.  It  is  their  joint  and  aggregate  earn¬ 
ings  that  enable  the  average  family  to  get  through.  If  each 
male  worker  were  married  and  the  sole  support  of  an  aver¬ 
age  family  of  five,  poverty  would  be  prevalent  among  all 
wage  earners;  while  if  families  were  dependent  upon  the 


Wages  Under  the  New  Capitalism  375 


wages  paid  to  female  workers,  they  would  long  ago  have 
sunk  into  misery  and  wretchedness. 

We  propose  to  change  this  in  due  time.  To  keep  down 
the  wages  of  a  worker  below  a  living  standard  on  the  theory 
that  there  are  other  workers  in  his  family — wife,  daughters 
or  sons,  sisters  or  brothers,  and  that  between  them  they  can 
manage  to  “get  by,”  is  only  keeping  the  road  to  the  poor- 
house  open,  and  the  jails  well  filled. 

A  Fundamental  Principle 

Fair  and  reasonable  wages  for  all  workers  will  be  a  fun¬ 
damental  principle  under  the  New  Capitalism.  If  too  low 
wages  are  being  paid  in  any  line  of  industry,  or  for  any 
kind  of  service,  it  will  be  our  earnest  purpose  to  raise  them 
to  a  point  where  they  will  be  fair  and  reasonable.  If,  on 
the  other  hand,  it  will  be  found  that  for  certain  kinds  of 
work  or  service,  excessively  high  wages  are  being  paid,  we 
shall  seek  to  make  what  must  be  considered  a  fair  and 
reasonable  adjustment.  But  I  rather  think  that  by  the 
time  this  book  is  published,  the  Capitalistic  System  will 
have  completed  the  “liquidation”  of  all  wages,  and  that 
we  shall  not  be  obliged  to  waste  any  of  our  time  revising 
wages  downward.  For  several  years  now  we  have  been 
told,  with  maddening  insistence,  that  some  groups  of  work¬ 
ers  are  receiving  unconscionably  high  wages.  But  no  stress 
has  been  put  on  the  fact  that  only  the  wages  rates  are  high 
— that  the  actual  annual  earnings  of  those  engaged  in  occu¬ 
pations  in  which  high  wage  rates  prevail,  constitute  only 
an  average  living  wage.  No  particular  stress  has  been 
placed  on  the  very  vital  fact  that  many  of  the  workers 
receiving  high  wage  rates  work  only  part  of  the  time.  Nor 
has  it  been  deemed  worthy  of  emphasis  that  all  wage  earn¬ 
ers  are  being  paid  with  considerably  depreciated  wTage 
dollars. 

Labor  Will  Fix  its  Oivn  Wage 

The  New  Capitalism  will  insist  on  a  fair  and  reasonable 
wage  for  all  workers.  There  is,  and  can  be,  no  such  thing 


376 


The  New  Capitalism 


as  a  fixed  wage  applicable  for  any  and  all  kinds  of  labor. 
There  is  skilled  and  unskilled  labor;  there  is  labor  that  is 
productive  and  labor  that  is  non-productive ;  there  is  labor 
that  is  menial,  requiring  no  high  order  of  intelligence  for 
its  performance,  and  labor  that  demands  more  than  ordi¬ 
nary  intelligence.  The  scientific  classification  and  grading 
of  service,  and  determining  its  fair  and  reasonable  reward, 
is  part  of  our  plan.  It  will  be  our  endeavor,  in  due  time, 
to  determine  what  constitutes  a  fair  and  reasonable  wage 
for  each  of  the  different  kinds  of  labor.  But  whatever  kind 
of  work  or  character  of  labor,  or  quality  of  service,  one 
thing  is  certain — that  wages  must  be  ample,  and  not  merely 
intended  to  enable  the  wage  earner  and  his  family  barely 
to  subsist.  In  my  system  of  economics  even  the  lowest  wage 
implies  an  excess  of  sufficiency  for  subsistence.  For  I  hold 
that  even  the  humblest  worker,  and  his  family,  is  entitled  to 
more  than  a  bare  subsistence ;  just  as  I  hold  that  any  indus¬ 
try  that  cannot  flourish  save  by  paying  less  than  subsistence 
wages  does  not  deserve  to  survive. 

It  is  to  be  remembered  that  my  proposal  provides  that 
the  scientific  adjustment  of  wages  and  wage  rates,  shall  be 
made  by  those  most  concerned — by  Labor  in  the  aggregate, 
acting  through  accredited  representatives.  Hitherto  Cap¬ 
ital  alone  has  dictated  wage  terms,  and  Labor  had  no 
alternative  but  to  accept  them.  Henceforth,  Labor  will 
decide  for  itself  what  is  a  fair  and  reasonable  wage  for  every 
kind  of  work  and  service.  This  important  matter  settled 
to  the  satisfaction  of  all  concerned,  means  the  end  of  strikes 
— “a  consummation  devoutly  to  be  wished.” 

Wages ,  and  a  Margin  of  Profit 

A  standard  wage,  that  shall  also  be  permanent,  i.  e.,  not 
subject  to  fluctuations),  and  always  ample,  that  is,  a  wage 
which  after  the  exchange  involved  in  the  purchase  of  the 
necessary  living  commodities  leaves  a  reasonable  surplus  in 
favor  of  those  who  work  for  wrages — would  yield  not  only 
a  satisfactory  solution  of  the  wage  question  but  solve  prac¬ 
tically  all  of  our  economic  difficulties.  One  would  not — 


Wages  Under  the  New  Capitalism  377 


one  could  not — quarrel  with  a  wage  whose  quantity  is  not 
only  always  adequate  for  the  purchase  of  the  essentials  of 
life  and  its  implied  reasonable  comforts,  but  always  some¬ 
what  greater  than  the  purchase  price  of  the  things  involved 
in  the  maintenance  of  a  comfort  level  of  living. 

I  hold  that  there  is  a  point  somewhere — precisely  where 
I  am  unable  to  say,  though  under  my  system  it  can  and 
will  be  ascertained — at  which  wages  could  be  permanently 
fixed  and  prices  practically  stabilized,  which  would  yield 
to  Labor  a  fair  recompense,  and  to  Capital  a  fair  profit, 
besides  maintaining  a  nicely  balanced  economic  equilibrium 
between  income'  and  living  costs,  wages  being  always  some¬ 
what  in  excess  of  living  costs,  thus  leaving  a  margin  of 
profit  (surplus  or  savings)  to  the  wage  earner. 

Capital  is  Uncompromising 

Up  to  the  beginning  of  the  twentieth  century  the  ten¬ 
dency  of  Capital  was  to  increase  its  profits  by  keeping 
down  wages.  But  with  the  inauguration  of  the  scientific 
Capitalistic  Entrepreneur  System,  Capital  became  more 
ambitious,  and  determined  to  increase  its  profits  not  only 
by  keeping  wages  low  but  also  by  gradually  increasing 
prices.  But  this  seriously  disturbed  the  exchange  value  of 
wages  and  the  purchasing  power  of  money,  partially  to 
recover  which  Labor  found  itself  put  to  the  necessity  of 
demanding  progressive  wage  increases.  These  were  reluc¬ 
tantly  granted.  But  the  Capitalistic  Entrepreneurs,  hav¬ 
ing  tasted  of  the  flesh-pots  of  Egypt — i.  e.,  garnered  a 
greater  profit — refused  to  be  driven  from  their  banquet 
table,  and  sought  to  maintain  the  greater  profit  by  still  fur¬ 
ther  increasing  prices,  mendaciously  blaming  the  somewhat 
higher  wages  they  were  compelled  to  pay  to  Labor.  And 
thus  it  continued  all  through  the  years,  and  all  through 
the  war,  up  to  the  end  of  1920. 

Then  we  entered  upon  what  it  pleased  some  to  call  the 
‘‘liquidation  or  re-adjustment”  period.  Capital  first  low¬ 
ered  wages,  then,  reluctantly,  prices,  though  in  no  case,  if 
fairly  computed  in  dollars  and  cents,  have  prices  been 


378 


The  New  Capitalism 


lowered  to  the  same  extent  as  wages.  The  liquidation  is 
not  yet  completed;  the  adjustment  is  still  going  on.  How 
long  it  will  take  Capital  to  finish  the  job  I  am  unable  to 
say.  But  I  will  venture  the  guess  that  in  the  final  summing 
up,  Labor  will  find  itself  worse  off  than  ever  before. 

Capital  is  Unwilling  to  Share  in  Losses 

The  Capitalistic  philosophy  demands  that  when  the 
profits  are  big,  i.  e.,  largely  in  excess  of  normal,  Capital 
shall  keep  them  all  for  itself ;  Labor  is  not  to  share  in  them. 
But  when  profits  are  small,  falling  even  a  fraction  below 
normal,  Capital  immediately  insists  that  its  deficit  be  made 
up  out  of  the  Avages  of  Labor. 

In  all  the  Capitalistic  palaver  about  “cutting  down 
costs’'  it  has  never  occurred  to  a  single  contingent  in  the 
Capitalistic  group  to  suggest  cutting  down  anything  but 
wages.  Labor  must  bear  the  brunt  of  any  “saving”  it  is 
desired  to  affect.  The  Capitalistic  group  is  unwilling  to 
apply  any  “saving”  device  to  itself — to  Capital.  It  is 
quite  willing  to  deduct  from  Labor ’s  wages  enough  to  make 
up  for  any  loss ;  but  never  willing  to  deduct  even  a  fraction 
of  the  loss  from  Capital’s  reward.  If  there  is  business  stag¬ 
nation  ;  if  the  wheels  of  commerce  do  not  move ;  if  the  chan¬ 
nels  of  trade  are  clogged  and  it  is  necessary  to  ‘  ‘  save,  ’  ’  the 
only  source  whence  the  Capitalistic  group  is  willing  to 
“save”  is  from  Labor’s  reward — from  Labor’s  wages. 

The  Capitalistic  group  insists  upon  its  pound  of  flesh — 
in  sunshine  or  in  rain,  in  fair  weather  or  in  foul.  Let  the 
evil  days  come;  they  fall  entirely  upon  the  shoulders  of 
Labor.  Let  the  fat  years  reign — never  in  all  its  history 
has  Capital  been  willing  to  accord  to  Labor  more  than  a 
bare  living  wage — not  even  in  its  most  prosperous  times. 
Let  the  lean  years  set  in,  Labor,  not  Capital,  pays  the  pen¬ 
alty.  If  there  is  scarcity  of  consumption,  the  wage  earner 
suffers,  not  Capital.  If  there  is  scarcity  of  production, 
again  the  wage  earner  pays.  I  hold  that  when  things  go 
awry,  for  whatever  reason,  Labor  should  not  be  made  to 
bear  the  entire  burden;  Capital  should  be  made  to  share  it 


Wages  Under  the  New  Capitalism  379 


— to  bear  at  least  a  part  of  it.  If  the  conditions  are  dis¬ 
turbed  or  abnormal,  Capital  tries  to  save  its  own  bacon  by 
compelling  the  workmen  and  women  to  accept  a  smaller 
wage,  in  order  that  its  profits  may  remain  the  same  as  in 
normal  times. 

Labor  Always  at  the  Mercy  of  Capital 

The  Capitalistic  System  has  built  up  its  brutal  strength, 
its  despotic  might,  its  cruel  power,  on  the  principle  of 
“earning  power,”  but  when  Capital’s  earning  power  does 
not  come  up  to  expectation,  when  it  falls  belowr  6  percent, 
Capitalists  reimburse  themselves  out  of  the  pay  envelope 
of  those  who  labor. 

The  “earning  power”  of  Capital  and  the  exchange  value 
of  wages,  are  in  direct  conflict;  as  the  one  rises  the  other 
is  bound  to  fall.  The  increase  in  the  earning  power  of 
Capital  is  derived  chiefly  from  the  decrease  in  the  exchange 
value  of  wages.  Conversely  it  should  be  true  that  a  decrease 
in  the  earning  power  of  Capital  produce  an  increase  in  the 
exchange  value  of  wages.  But  no  such  phenomenon  is 
observable.  The  whole  intent  of  the  Capitalistic  System  is 
to  prevent  this  perfectly  natural  phenomenon  from  taking 
place.  Whenever  for  whatever  reason,  a  decrease  in  the 
earning  power  of  Capital  threatens  the  Capitalistic  System 
insists  on  a  decrease  in  wages — and  thus  maintains  its  max¬ 
imum  earning  power — its  maximum  profit.  There  is  no 
escape  for  the  wage  earner  from  the  adverse  operation  of 
this  Capitalistic  device.  No  matter  which  way  the  wind 
blows — Capital  always  protects  itself — Labor  always  suffers. 

Stabilizing  W ages  and  Prices 

However,  in  this  chapter  I  want  to  show  the  solution  my 
system  proposes.  We  will  ascertain  the  point  of  safety  for 
Labor  and  Capital ;  at  which  we  shall  endeavor  to  stabilize 
wages  and  prices,  thus  stabilizing  the  exchange  value  of 
wages  and  the  purchasing  power  of  money.  This  stabiliza¬ 
tion  will  be  made  at  a  point  that  will  leave  a  fair  profit 
for  Capital — and  a  fair  profit,  that  is  a  wage,  that  will 


380 


The  New  Capitalism 


leave  a  surplus  or  savings  over  living  costs — to  Labor. 
That  is  one  of  the  primary  purposes  of  the  system  of  eco¬ 
nomics  I  am  proposing  in  this  book. 

Let  me  summarize  the  essential  features  of  my  plan  with 
regard  to  wages  and  prices.  It  is  intended: 

1 :  To  establish  an  equilibrium  between  wages  and  prices ; 

2  :  To  increase  the  exchange  value  of  wages ; 

3 :  To  increase  the  wage  earners’  ability  to  save. 

The  Government  of  the  United  States  has  declared  that 
the  dollar  shall  be  a  unit  of  value,  and  the  equivalent  of 
one  hundred  cents.  Our  Capitalistic  Entrepreneurs  how¬ 
ever,  have  decreed  that  the  exchange  value  of  the  wage 
dollar,  and  its  purchasing  power,  shall  be  considerably  less 
than  one  hundred  cents.  The  New  Capitalism  intends  to 
recover  a  considerable  portion  of  the  dollar’s  lost  value  by 
standardizing  wages  and  stabilizing  prices ;  thus  materially 
increasing  the  exchange  value  of  wages  and  the  purchasing 
power  of  money. 

The  economic  stability  and  the  commercial  safety  of  our 
nation,  and  the  material  welfare,  not  to  say  happiness,  of 
the  people,  depend  upon  the  very  elementary  principle  that 
the  value  of  money  be  practically  permanent,  its  purchas¬ 
ing  power  nearly  stable,  and  the  exchange  value  of  wages 
free  from  serious  fluctuations.  This  principle,  I  hold,  can 
be  permanently  established  and  maintained,  chiefly  by 
organized  Labor. 

Depreciation  of  the  “ Human  Machine” 

Nor  is  that  all  that  organized  Labor  can  accomplish 
under  the  New  Order,  and  through  the  instrumentality  of 
the  New  Capitalism.  Labor  can  raise  its  status  to  a  height 
not  attainable  under  the  “established”  Capitalistic  Order. 
At  present  the  average  worker  is  only  a  wage  earner,  who 
in  order  merely  to  live  is  compelled  to  exhaust  his  capital 
(i.  e.,  his  labor)  and  consume  his  dividends  (i.  e.,  his 
wages).  In  brief,  the  wage  earner  is  nothing  more  than  a 
machine,  but  receiving  less  consideration  at  the  hands  of 
Capital  than  the  machines  in  shops,  factories,  mines  and 


Wages  Under  the  New  Capitalism  381 


mills,  and  for  which  the  Capitalistic  System  carefully  com¬ 
putes  ‘  ‘  depreciation.  ”  But  not  for  the  wage  earner — the 
human  machine;  no  allowance  is  made  by  Capital  for 
“depreciation”  of  the  human  machine,  or  for  its  obso¬ 
lescence,  or  exhaustion. 

“A  Modern  Instance ” 

Slason  Thompson,  statistical  expert  for  the  railroads, 
said  in  1914  that  the  average  holdings  of  the  railroad  stock¬ 
holders  was  $15,000.  What  does  this  mean?  It  means  that 
if  all  the  railroad  stock  were  divided  equally  among  the 
•stockholders,  each  “investor”  would  be  allotted  $15,000  of 
stock.  With  this  as  a  basis  let  us  make  our  computations. 

Needless  to  say  the  average  railroad  stockholder,  as  far 
■as  the  properties  in  which  he  holds  stock  are  concerned,  is 
a  non-producer — a  non- worker.  Nevertheless  he  receives 
in  the  course  of  twelve  months,  dividends  which,  computed 
at  6  percent  per  annum,  amount  to  $900 — an  amount 
greater  than  the  average  railroad  employee,  working  eight 
hours  a  day,  and  probably  in  excess  of  300  days  a  year, 
receives  as  wages.1 

Continuing  our  computations :  At  the  end  of  twenty- 
five  years  the  average  railroad  stockholder  will  have 
received  in  dividends  a  total  of  $22,500,  for  which  not  one 
hour  of  labor  has  been  given,  not  an  hour  of  service 
rendered;  and  his  capital  of  $15,000  still  remains  intact, 
and  its  earning  power  at  its  full  strength. 

Whereas,  at  the  end  of  twenty-five  years  the  average  rail¬ 
road  employee  will  have  received  in  wages  a  total  of  $20,250, 
for  which  he  has  given  11,500  days  of  labor — 92,000  hours 
of  service.  It  will  be  conceded  that  a  man  who  toils  eight 
hours  a  day  for  twenty-five  years,  has  expended  consider¬ 
able  of  his  strength ;  and  that  his  earning  power  decreases 
with  his  productive  power.  A  few  years  more  and  his 
capital  (labor)  is  exhausted,  and  his  dividends  (wages) 
will  cease.  He  is  ready  for  the  economic  scrap  pile. 

If  at  the  end  of  twenty-five  years  the  average  railroad 


i  In  1914  the  average  wage  per  railroad  employee  was  $810. 


382 


The  New  Capitalism 


stockholder  dies,  he  leaves  to  his  heirs  $15,000,  after  having 
drawn  $22,500  in  dividends.  Whereas  the  average  railroad 
employee,  having  been  compelled  to  consume  both  his  cap¬ 
ital  and  his  dividends,  will  probably  be  buried  at  his 
children’s  expense. 

The  Smoke  Screen  “Small  Investor” 

But,  the  stock  of  the  railroad  is  not  equally  divided. 
The  $900  per  stockholder  is  only  a  statistical  distribution, 
based  upon  that  precarious  device  called,  in  this  particular 
case,  “average  holdings.”  The  average  small  investor  has 
no  such  income.  I  do  not  pretend  to  know  what  the  yearly 
income  per  small  stockholder  is,  for,  information  that  would 
enable  one  to  make  computations  is  not  available.  But  I 
will  venture  to  guess  that  in  the  case  of  the  railroads,  the 
average  small  investor  receives  only  a  fraction  of  the  sta¬ 
tistical  $900.  I  should  say  somewhere  between  $100  and 
$200,  and  I  consider  that  a  liberal  estimate.2  The  lion’s 
share,  that  is  $700  or  $800  of  each  “average  investor’s” 
statistical  dividend  revenue,  goes  to  a  few  thousand  big 
stockholders — the  financial  potentates  who  annually  con¬ 
vert  their  collective  and  concentrated  incomes  into  vast 
new  Capital  accumulations,  while  the  average  small  stock¬ 
holder,  in  all  probability,  is  compelled  to  consume  the 
income  derived  from  his  small  holdings. 

The  Wage  Earner’s  “ Reserves ” 

One  would  not  quarrel  with  the  Capitalistic  System, 
which  has  persistently  excluded  the  human  machine — the 
wage  earner — from  participation  in  any  depreciation  fund, 
if  it  were  disposed  to  be  more  liberal  with  regard  to  his 
wages.  But  Capital  has  never  been  willing  to  accord  to 
Labor  a  wage  that  would  enable  each  worker  to  build  up 
a  reserve  against  the  calamitous  years  when  his  earning 
power  becomes  less,  or  he  is  incapacitated  through  infirmity, 
sickness,  accident,  or  other  causes. 

2  In  1914  Mr.  Slason  Thompson  declared  that  the  average  yearly 
return  on  railroad  investments  for  the  past  twenty-five  years  “has 
not  averaged  three  percent.”  Let  the  small  investors  in  railroad  and 
other  Capitalistic  securities  take  note. 


Wages  Under  the  New  Capitalism  383 


A  wage  that  is  calculated  to  merely  allow  a  wage  earner 
and  his  family  to  live,  deprives  the  wage  earner  of  the 
opportunity  to  accumulate  a  surplus  against  contingencies 
and  eventualities.  Under  my  system  the  wage  earner  will 
be  enabled  to  do  for  himself  what  Capital  has  either  refused 
to  do  for  him,  or  has  deliberately  prevented  him  from  doing 
for  himself.  Under  my  system  the  wage  earner  will  be 
more  than  a  mere  machine.  He  will  be  a  component  part 
of  the  industry  in  which  he  is  employed.  For  the  work  he 
does  he  will  receive  a  wage  as  at  present — not,  however,  a 
mere  living  wage,  but  an  ample  wage  that  will  enable  him  to 
set  up  protective  reserves — both  a  depreciation  fund  and 
a  surplus  fund. 

Tifie  Wage  Earner  Investor  and  Capitalist 

Moreover,  he  will  deposit  his  earnings  in  banks  whose 
funds  are  used  by  himself,  not  by  speculators  and  gamblers. 
Thus  he  will  be  given  an  opportunity  to  invest  his  savings 
for  his  own  benefit — rather  than  for  the  benefit  of  others. 
Whatever  profits  will  be  derived  from  the  investment  of 
his  savings  and  reserves,  will  accrue  to  himself  and  not  to 
persons  who  give  not  an  hour ’s  work  to  the  industry — who 
perhaps,  do  not  even  know  where  the  properties  in  which 
they  are  security  holders  are  located — who  have  never  set 
foot  in  the  plants  from  which  they  derive  dividends — or 
who,  perhaps,  are  not  even  residents  of  the  United  States.3 

Briefly  my  plan  contemplates  increasing  the  number  of 
investors  considerably,  to  such  an  extent  that  practically 
all  wage  earners  and  salaried  men  and  women,  will  be,  or 
at  least  could  be,  small  investors,  deriving  separate  incomes 
from  their  labor  and  their  investment,  during  the  greater 
part  of  their  lives. 

I  may  be  boasting  when  I  say  that  we  will  succeed  in 
doing  what  the  Capitalistic  Entrepreneurs,  with  all  their 

8  Prior  to  the  war  it  was  estimated  that  about  five  billions  of  Euro¬ 
pean  capital  was  invested  in  American  securities.  One  wrtier  went 
so  far  as  to  say  that  more  than  ten  billions  of  English  Capital  is 
invested  in  the  United  States  alone.  I  give  these  figures  as  mere 
estimates. 


384 


The  New  Capitalism 


“ brains’ ’  have  failed  to  do,  what  they  are  so  desperately 
trying  to  do  at  the  present  time — viz.,  to  greatly  increase 
the  number  of  small  “  investors.  ’  ’  Under  my  plan  all  the 
workers — that  is  to  say  a  majority  of  the  public  who  are 
now  and  will  continue,  under  the  Capitalistic  Entrepre¬ 
neur  System,  to  be  classed  merely  as  wage  earners,  will  have 
an  opportunity  to  change  their  status  from  non-investor 
to  investor  and  capitalist.  We  will  make  stock  owners ,  not 
stock  holders  of  them;  co-partners  in  our  enterprises; 
co-owners  of  our  properties;  co-sharers  in  all  the  benefits 
accruing  to  an  investor  and  in  the  profits  reaped  by  a 
Capitalist. 

No  Altruism  in  Business 

There  is  not  a  single  instance  on  record  of  any  man,  or 
group  of  men,  going  into  business  primarily  to  promote 
the  public  welfare.  The  sole  impetus  has  ever  been  the 
desire  to  make  money;  the  prime  motive — Profits.  The 
railroads  of  the  United  States  were  built  not  so  that  people 
might  conveniently  and  cheaply  travel  whithersoever  they 
please,  or  that  they  might  have  their  supplies  transported 
from  the  place  of  production  to  their  homes  at  a  minimum 
cost.  Nor  were  they  built  for  the  purpose  of  giving  employ¬ 
ment  to  a  considerable  number  of  people.  The  inspiration 
for  their  building  must  be  sought  wholly  in  the  vision  of 
immense  profits  for  their  builders  and  promoters.  And 
this  perfectly  natural  aspiration  is  predicable  of  every  suc¬ 
cessful  industry.  If  any  benefits  redound  to  the  public  at 
large,  or  to  any  considerable  number  of  the  public,  that  is 
always  incidental,  or,  which  is  more  likely,  because  in  the 
promulgation  of  benefits  the  profits  were  to  be  found. 
Profits,  ever  and  always,  were  the  inspiration,  the  im¬ 
petus  and  the  beacon  light.  Profits — and  “the  public  be 
damned !  ’  ’ 

Pro  jits  Under  the  New  Capitalism 

Will  we  turn  up  our  noses  at  profits?  We  will  not! 
Indeed  there  is  one  good  thing  about  the  tremendous  price 


Wages  Under  the  New  Capitalism  385 


increases  and  concurrent  wage  increases  that  have  been 
made  during  the  past  twenty-five  years.  It  will  give  the 
New  Capitalism  a  fine  opportunity  to  prove  its  value  to 
the  workers — to  that  large  group  who  are  today  non¬ 
investors.  Here  is  the  formula:  High  prices  and  high 
wages  have  yielded  immense  profits  to  the  Capitalistic  group 
and  constituent  members  of  the  Capitalistic  System.  We 
accept  the  status  quo.  We  accept  the  high  prices  and  the 
high  wages.  We  will  maintain  wages  at  the  high  point  and 
then  deliberately,  gradually,  systematically,  reduce  prices 
— i.  e.,  living  costs.  The  corporate  profits  quite  naturally, 
will  be  less — but  the  savings  of  the  individuals  will  be 
greater.  These  savings  are  profits  in  the  true  sense  of  the 
word,  but  instead  of  appearing  conspicuously  on  the  books 
of  our  corporations  they  will  appear  conspicuously  in  the 
pockets  of  the  workers.  Instead  of  being  retained  by  a 
few,  as  at  present,  our  profits  will  be  distributed  among 
the  many  through  the  medium  of  lower  prices,  i.  e.,  as  a 
result  of  a  greater  exchange  value  of  wages  and  a  higher 
purchasing  power  of  money. 

In  brief,  there  will  be  no  elimination  of  profits;  the  only 
difference  being  that  henceforth  they  will  be  savings.  More¬ 
over,  these  savings  will  become  Capital  accumulations,  con¬ 
vertible  into  investments,  the  normal  returns  or  dividends 
on  which  will  accrue  to  the  savers  themselves  as  investors, 
not  as  at  present,  to  the  Capitalistic  users  of  the  savings 
of  the  wage  earners. 

Pro  jits  and  Capital  Accumulations 

There  are  those  who  will  say  that  the  maintenance  of 
high  wages  and  the  lowering  of  prices  are  mutually  ex¬ 
clusive — that  it  is  impossible  to  pay  high  wages  and  reduce 
living  costs.  Well,  we  shall  see  whether  they  are  right;  we 
propose  to  find  out  for  ourselves.  In  the  meantime  let  us 
not  forget  that  the  capital  accumulations  during  the  past 
twenty  years  have  been  at  the  rate  of  ten  billion  a  year. 
These  immense  capital  accumulations  were  derived  from 
the  bountiful  Capitalistic  profits  accruing  from  sundry 


386 


The  New  Capitalism 


sources ;  inflation  of  capitalization,  money  monopoly, 
monopoly  of  raw  materials,  manufacturing  industries, 
transportation  systems,  public  utilities,  speculation  in  farm 
products,  exorbitant  rentals, — and  from  stock  gambling. 

Under  my  system  the  capital  accumulations  will  not  be 
so  great.  Indeed  it  is  for  the  specific  purpose  of  cutting 
down  capital  accumulations  that  we  propose  to  organize. 
Since  there  will  be  no  money  monopoly  as  it  exists  today 
there  will  be  a  considerable  reduction  in  the  “  profits ” 
derived  from  this  source  alone;  but  a  greater  saving  will 
result  to  the  public.  With  regard  to  the  industries — we 
will  have  no  inflated  capitalization;  no  dividends  to  pay 
on  non-existing  capital.  This  will  decrease  “profits”  but 
increase  savings.  And  since  there  will  be  no  speculating 
in  our  stocks  possible,  a  source  of  revenue  now  wide  open 
to  promoters,  speculators  and  gamblers  will  be  practically 
cut  off.  All  of  which  will  have  a  tendency  to  cut  down 
what  has  hitherto  been  called  in  Capitalistic  parlance, 
profits,  or  capital  accumulations.  But  savings  will  increase. 

Let  me  illustrate  the  principle :  Let  me  say  that  in  a 
given  year  twenty-five  billions  of  wages  were  paid,  and  that 
living  costs  totaled  twenty-five  billions.  The  exchange  of 
the  twenty-five  billions  of  wages  for  twenty -five  billions  of 
living  commodities,  yielded  a  profit  that  enabled  a  few 
million  of  the  Capitalistic  System  to  heap  up  say,  five  bil¬ 
lions  of  capital  accumulations. 

Under  the  New  Capitalism  wages  would  remain  the  same 
— twenty-five  billions — but  living  costs  would  be  lowered  to 
twenty  billions,  let  us  say.  The  difference,  five  billions,  will 
remain  in  the  possession  of  the  wage  earners  as  savings. 
That  is  the  vital  difference  that  I  shall  ask  you  to  keep 
constantly  in  mind.  Their  savings  will  become  the  capital 
accumulations  of  the  workers,  whose  income  from  wages 
will  be  augmented  by  an  income  from  their  investments. 

“How  can  a  nation  be  rich  without  having  rich  men  in 
it?”  asked  a  financial  writer  recently. 

I  will  answer  that  question  after  the  writer  quoted 
answers  these  few  questions: 


Wages  Under  the  New  Capitalism  387 


1 :  What  is  the  difference  whether  the  aggregate  of  a 
nation’s  wealth — for  instance  that  of  the  United  States, 
said  to  be  288  billions — is  owned  by  four  million  families 
or  by  twenty  million  families? 

2 :  Which  nation  is  richer — the  one  whose  productive 
properties  are  owned  by  four  million  families  of  investors 
or  by  twenty  million  families  of  investors? 

3  :  Is  it  preferable  that  the  profits  derived  from  the  indus¬ 
try  of  the  nation ’s  workers  be  concentrated  in  the  hands  of 
a  few,  or  more  widely  diffused  among  the  many? 

4:  If  the  national  income  in  1918  was,  as  claimed,  fifty- 
five  billion,  would  the  nation  be  poorer  today  if  the  uncon¬ 
sumable  portion  were  reinvested  by  twenty  million  families 
rather  than  by  only  four  million  of  the  twenty  million 
families  ? 

I  could  ask  a  few  other  pertinent  questions,  but  these  will 
suffice  for  the  present. 

And  Mamvnonism  Must  Bleed  to  Death 

Let  it  be  understood  that  I  have  never,  and  I  do  not 
now  advocate,  what  is  sometimes  spoken  of  as  an  “equal 
division”  of  profits  or  of  wealth.  Against  such  proposals 
I  set  my  teeth.  But  I  do  demand  that  henceforth  the  pres¬ 
ent  non-investor  public — the  wage  earners — shall  be  given 
a  greater  opportunity  of  saving  a  fair  part  of  their  wages, 
and  an  opportunity  of  investing  their  savings  in  enter¬ 
prises  that  belong  to  them  rather  than  in  enterprises  that 
belong  to  a  mighty  few.  And  that  they,  rather  than  the 
mighty  few,  shall  receive  whatever  profits  might  accrue 
from  the  joint  investment  of  their  capital  (savings)  and 
their  labor. 

If  this  can  be  done  (and  the  whole  purpose  of  my  book 
is  to  show  that  it  can  be  done),  the  problem  of  the  distri¬ 
bution  of  profits  and  wealth  will  be  solved  in  a  manner 
that  is  legitimate,  fair  and  just.  And  the  evil  of  Mam- 
monism — the  concentration  of  all  the  wealth  in  the  hands 
of  a  few,  will  cease  to  afflict  us. 


CHAPTER  XXVIII 

The  Cost  of  Living  Under  the  New  Capitalism 

THROUGHOUT  this  work  I  have  endeavored  to  con¬ 
fine  myself  strictly  to  facts  and  figures,  all  of  which 
I  have  used  as  a  basis  for  my  various  statements,  con¬ 
tentions,  computations,  deductions  and  conclusions.  In 
this  chapter  I  am  going  to  indulge  my  fancy  just  a  little, 
and  even  allow  my  imagination  to  roam  at  will. 

Let  me,  therefore,  continue  to  suppose  the  existence  of 
the  New  Order,  and  that  the  New  Capitalism  has  begun  to 
function.  It  will  take  at  least  one  year  to  raise  the  initial 
$300,000,000.  Beyond  a  doubt,  with  all  potentialities  ex¬ 
ploited  to  the  fullest  extent  (as  can  be  seen  from  Chapter 
XIX)  we  could  raise  the  requisite  initial  capital  within 
ninety  days;  but  that  is  not  desirable,  for  the  reason  that 
before  we  can  effectively  employ  our  capital  it  will  be 
necessary  to  thoroughly  and  completely  organize,  and  plan 
our  campaign — measuring  every  step  of  the  way,  and  the 
distance  we  are  to  go.  And  this,  I  figure,  will  take  at 
least  twelve  months,  during  which  time — be  it  remembered 
— we  would  be  accumulating  $300,000,000  of  our  Basic 
Capital  Fund.  We  shall  hardly  care  to  begin  aggressive 
operations  before  that  time.  Even  after  setting  ourselves 
in  motion  the  effects  of  our  operations  will  not  be  materially 
felt  during  the  first  year ;  not  until  the  following  year  will 
we  be  able  to  show  unmistakable  results.  I  say  this  pre¬ 
ferring  to  be  conservative  in  making  promises,  or  painting 
visions,  or  raising  hopes,  for  I  would  rather  surprise  all 
those  who  will  be  interested  in  watching  our  .progress,  by 
exceeding  their  expectations,  than  disappoint  them  by  fall¬ 
ing  short  of  their  fulfilment. 


388 


Cost  of  Living  Under  New  Capitalism  389 


Briefly  summarized  the  endeavor  of  the  New  Order  under 
the  New  Capitalism  will  be  to  bring  the  living  costs  of  the 
average  wage  earner  (or  non-investor)  family  down  to  a 
point  that  will  leave  a  surplus  of  wages  to  be  invested  by 
the  wage  earners  themselves,  in  enterprises  that  will  yield 
an  income  in  addition  to  wages. 

The  Normal  Level  of  Living  Costs 

But  before  we  can  establish  a  normal  level  of  living 
costs,  it  behooves  us  to  ascertain  what  can  be  considered  a 
rational  and  attainable  level.  Precisely  where  is  a  normal 
or  rational  level  of  living  costs  to  be  found  ?  In  what  year 
can  it  be  said  that  living  costs  were  at  a  normal  or  rational 
level?  In  1896  prices  were  at  their  lowest;  the  dollar  had 
its  greatest  value ;  wages  their  greatest  exchange  value.  Is 
this  the  normal  or  rational  level? 

I  shall  say  no!  But  even  if  it  were — and  if  returning 
thither  were  desirable  and  the  ultima  thule  of  all  economic 
endeavor,  the  return  trip  would  have  to  be  so  slow  as  to 
become  wearisome  to  the  travelers.  It  would  have  been 
easier  ten  years  ago;  today  it  is  well  nigh  impossible,  and 
we  may  just  as  well  dismiss  the  thought  from  our  minds, 
once  and  for  all.  Moreover,  the  war  has  produced  certain 
economic  effects  that  must  be  reckoned  with — that  cannot 
be  ignored.  To  make  a  long  story  short  I  have  set  as  an 
attainable  goal  the  living  costs  of  1915 — not,  however,  by 
the  familiar  Capitalistic  Entrepreneur  method  of  lowering 
wages  first.  In  fact  my  plan  does  not  contemplate  the 
cutting  of  wages;  on  the  contrary  it  insists  on  the  main¬ 
tenance  of  prevailing  wages. 

The  Living  Costs  Per  Family 

Let  us  confine  ourselves  for  the  present  to  the  subject  of 
“living  costs,”  and  see  how  they  mounted  under  the 
gegis  of  the  Capitalistic  Entrepreneur  System,  and  of 
which  mounting  the  Capitalistic  Entrepreneurs  were  the 
principal  beneficiaries. 

The  cost  of  living  for  an  average  family  in  1900  was 


390 


The  New  Capitalism 


about  $650  a  year.  This  cost  increased  in  the  last  twenty 
years  about  as  follows  : 


Average  yearly 
increase. 

1900  . $  650 

1910  .  850  $20.00 

1915  .  1,100  50.00 

1920  .  1,5501  90.00 


The  increases  were  less  by  leaps  and  bounds  than  by  a 
steady,  gradual  growth.  For  the  first  ten  years  of  the 
Capitalistic  System  the  increases  were  at  the  rate  of  about 
$20  a  year.  For  the  next  five  years,  at  the  rate  of  about 
$50  a  year.  From  1915  to  1920,  at  the  rate  of  about  $90 
a  year.  All  the  increases  were  cumulative  and  are  now 
permanent.  If  there  is  no  marked  recession  in  the  retail 
prices  of  all  classes  of  commodities,  or  a  considerable 
increase  in  quality  (and  matters  in  this  regard  will  grow 
worse  instead  of  better  under  the  Capitalistic  Entrepreneur 
System) ;  if  rents  remain  at  their  present  high  figure,  it 
means  that  from  now  on  every  average  family  will  pay 
$900  a  year  more  each  calendar  year  than  in  1900,  or  $9,000 
during  the  next  ten  years.  It  means  that  the  16,000,000 
non-investor  families  henceforth — thanks  to  the  ingenuity 
of  the  Capitalistic  arrangement — will  pay  $14,400,000,000 
a  year  more  for  the  bare  privilege  of  living  then  they  did 
twenty  years  ago.  Think  of  it ! — $14,400,000,000  a  year,  or 
a  total  of  $144,000,000,000  during  the  next  ten  years. 

Under  the  New  Capitalism  we  propose  to  bring  down  the 
living  costs,  not  suddenly  but  gradually,  steadily,  and  pro¬ 
gressively.  We  propose  to  reduce  them  at  the  rate  of  about 
$50  a  year.  Within  five  years  we  would  bring  down  the 
cost  of  living  commodities  from  $1550  to  about  $1350 ;  and 
within  ten  years  to  approximately  the  1915  level,  i.e.,  to 
about  $1100.  This  reduction  would  mean  a  saving  of  $450 
a  year  for  an  average  family,  or  a  saving  of  $4,500  in  ten 
years  per  family. 

i  Throughout  this  book  I  have  conservatively  considered  $1,500 
as  the  living  cost  of  an  average  family,  in  spite  of  the  fact  that 
unbiased  statisticians  have  computed  that  a  family  can  not  live  in 
decent  comfort  for  less  than  $2,000,  some  even  claiming  $2,600  as 
a  minimum. 


Cost  of  Living  Under  New  Capitalism  391 


This  means  an  aggregate  saving  for  the  16,000,000  non¬ 
investor  families  of  $7,200,000,000  a  year,  or  $72,000,000,000 
within  ten  years. 

Take  your  choice,  my  fellow  workmen  and  non-invest¬ 
ors  !  Under  the  old  Capitalism  you  will  be  compelled  to 
pay  to  the  Capitalistic  System  during  the  next  ten  years 
$144,000,000,000  more  than  the  living  costs  of  1900. 
Whereas,  under  the  New  Capitalism  you  will  be  enabled 
to  save  $72,000,000,000  within  ten  years. 

Paying  Tribute  to  Caesar 

It  ought  to  be  possible  to  bring  living  costs  down  to  less 
than  a  thousand  dollars  a  year,  but  several  elements  will 
make  this  difficult,  if  not  impossible.  This  check  on  our 
ability  to  lower  living  costs  much  beyond  the  1915  level, 
is,  in  a  measure,  due  to  the  fact  that  we  will  have  to  contend 
for  a  while  wTith  adverse  conditions  created  by  the  Capital¬ 
istic  Entrepreneur  System  which  cannot  be  remedied  all  at 
once.  It  must  be  remembered  that  the  Capitalistic  group 
has  a  monopoly  on  practically  all  the  basic  materials  that 
enter  into  industry ;  coal,  iron,  lumber,  oil,  etc.  Under  the 
circumstances  the  basic  materials,  and  consequently,  fin¬ 
ished  products,  will  cost  more  than  they  would  if  they  were 
not  monopolistically  controlled.  In  due  time  we  mean  to 
break  this  monopolistic  stranglehold  on  the  basic  raw  ma¬ 
terials,  and  finished  products,  but  we  realize  that  it  will 
require  time  to  bring  this  about.  The  outstanding  feature 
of  the  situation  is  that  the  giant  Capitalistic  Entrepreneurs 
have  so  powerful  a  grip  on  many  of  the  important  materials 
and  products  that  for  a  while  we  shall  be  compelled  to  pay 
tribute  to  them.  Their  monopoly  in  due  time  will  be  broken 
— that  is  part  of  my  plan;  but  I  should  not  care  to  set  a 
time  limit  for  the  present. 

The  Nation’s  Tremendous  Freight  Bill 

I  have  already  shown  that  the  same  group  that  abso¬ 
lutely  controls  the  nation’s  finances,  and  has  a  monopoly 
of  the  basic  materials  and  the  industries,  also  owns  and 


392 


The  New  Capitalism 


controls  the  transportation  systems  of  the  United  States. 
I  shall  waste  no  time  in  expatiating  on  what  is  generally 
known,  that  the  increase  in  the  nation’s  freight  bill  has 
more  than  doubled  within  recent  years.  A  glance  at  the 
following  statistics2  for  the  “ freight  revenue”  of  the  rail¬ 
roads,  will  show  this  conclusively. 


R.  R.  Freight 
Revenue. 

1900  . $1,049,000,000 

1910  .  1,925,000,000 

1920  .  4,373,989,717 


A  chapter  could  easily  be  written  on  this  subject;  there 
is  so  much  to  say  about  it.  But  at  the  present  moment  I 
am  concerned  only  with  one  feature,  and  that  is,  that  as 
conditions  are,  or  rather  will  be  after  the  railroads  have 
“ adjusted”  the  wages  of  all  the  railroad  employees,  the 
nation  will  be  compelled  to  pay,  annually,  considerably 
more  freight  on  its  commodities  than  in  former  years.  In 
due  time  the  New  Order  will  demonstrate  the  possibility 
and  urgency  of  relief  from  this  tremendous  item  of  freight 
charges ;  but  nothing  can  be  done  immediately.  All  that  is 
said  here  is  for  the  purpose  of  emphasizing  that  it  is  one 
of  the  formidable  handicaps  which  the  Capitalistic  System 
has  constructed,  and  with  which  we  shall  grapple  as  best 
we  can  for  the  first  decade  of  years. 

Inflated  Real  Estate  Values 

There  are  other  disadvantages  under  which  we  will  be 
compelled  to  operate  for  some  time — thanks  to  the  iniqui¬ 
tous  principles  established  by  the  Capitalistic  System.  I 
refer  particularly  to  the  system  of  arbitrarily  inflated 
values  of  properties.  Inflation  is  universal;  it  applies  not 
only  to  the  properties  from  which  the  basic  materials  are 
derived,  and  to  the  manufacturing  industries — basic  or 
derivative — it  is  predicable  of  all  kinds  of  properties — par¬ 
ticularly  land.  Real  estate  values  everywhere,  or,  more 
properly  speaking,  real  estate  juices,  have  been  doubled 


2  Railway  Statistics  of  the  United  States,  for  1920. 


Cost  of  Living  Under  New  Capitalism  393 


and  trebled,  many  increased  tenfold,  thanks  to  the  stimulus 
for  speculation  and  for  “profit-taking”  given  to  the  real 
estate  speculators  by  the  Capitalistic  System. 

The  increase  in  the  value,  or  rather  in  the  prices,  of  city 
property  since  the  adoption  of  the  Capitalistic  System’s 
method  of  computing  “values”  has  been  enormous.  Natu¬ 
rally  the  inflation  of  “values”  means  higher  rents  and 
consequently  a  bigger  “overhead  expense,”  all  of  which 
has  increased  prices  to  the  non-investor  group,  and  is  likely 
to  prevent  the  cost  of  living  from  coming  down  to  its  ulti¬ 
mate  normal  level  for  some  years  to  come.  The  increase  in 
rentals,  within  recent  years,  instituted  throughout  the 
United  States,  is  responsible  for  a  considerable  increase  in 
living  costs.  I  do  not  mean  only  the  rents  paid  by  indi¬ 
viduals  and  families,  but  also  the  rents  for  offices,  stores, 
factories,  warehouses  ,etc.,  and  which  find  their  way  back 
into  the  living  costs.  I  should  say  that  the  average  is  easily 
100  percent  increase. 

The  rentals  of  stores,  shops,  offices  and  lofts,  were,  during 
the  war,  raised  from  fifty  to  three  and  four  hundred  per¬ 
cent.  This  was  brought  out  in  the  Lockwood  Committee 
investigation  in  New  York.  Increases  of  fifty  percent  were 
so  common,  Samuel  Untermyer,  Committee  Counsel,  said, 
that  he  would  not  trouble  himself  to  read  them  into  the 
record. 

“Some  of  the  buildings  named  by  Mr.  Untermyer  were, 
the  Standard  Oil  Building,  26  Broadway,  where  it  was 
charged,  one  rent  was  increased  from  $1,500  in  1916  to 
$4,700  in  1921,  and  another  from  $15,000  in  1920  to  $32,000 
in  1921 ;  Corn  Exchange  Building,  15  Williams  St.,  from 
$1,200  in  1918  to  $2,400  in  1921 ;  470  Fourth  Avenue, 
$4,500  in  1920  to  $12,000  in  1921.”  .  .  . 

“Among  the  many  instances  of  increased  rents  was  one 
where  a  tenant  whose  lease  called  for  $9,000  two  years  ago, 
now  pays  $24,000  for  the  same  suite. 

“There  were  some  cases  where  offices  renting  five  years 
ago  for  a  few  hundred  dollars,  were  leased  this  year  for 
several  thousand  dollars.  Tenants  who  paid  $2  a  square 


394 


The  New  Capitalism 


foot  last  year  in  a  down-town  sky-scraper,  sign  leases  for 
1921  requiring  payment  of  $6,  $7,  and  $8  for  the  same 
space.”3 

The  conditions  that  exist  with  regard  to  the  increases  in 
rentals  applies  to  all  the  cities  in  the  United  States.  Thou¬ 
sands  of  small  business  men  and  women  have  been  forced 
out  of  business  because  their  rent  had  been  raised  to  a  point 
that  made  continuance  unprofitable. 

The  Crushing  Burden  of  Taxes 

But  even  though  it  were  possible  to  break  the  Capital¬ 
istic  Entrepreneur  stranglehold  with  regard  to  monopolies 
and  inflated  values  and  high  rents,  within  a  single  year’s 
time,  there  are  two  items  which  we  cannot  of  our  own 
ability  reduce,  namely  the  taxes  that  have  arisen  out  of 
the  recent  war,  and  the  tariffs.  Briefly  stated,  the  Federal 
Government  collects,  and  will  indefinitely  collect,  from  the 
twenty  million  families,  annually,  from  four  to  five  billion 
dollars  a  year  in  taxes.  In  the  Mid-Month  Review  of  Busi¬ 
ness,  September  15,  1921,  published  by  the  Irving  National 
Bank  of  New  York,  statistics  compiled  by  George  W.  Norris, 
Governor  of  the  Philadelphia  Reserve  Bank,  pertaining  to 
the  annual  governmental  expenditures,  are  given.  Before 
the  war  these  were  computed  to  be  $33  per  family  of  five. 
Now  they  are  $214.80  per  family  of  five. 

Surely  there  is  none  to  dispute  that  the  wage  earners — 
the  non-investors — pay  the  major  portion  of  all  taxes 
directly  and  indirectly. 

The  following  is  an  excerpt  from  an  article  ‘  ‘  The  Crush¬ 
ing  Burden  of  Taxation,”  published  in  The  Boston  Com¬ 
mercial ,  April  8,  1922 : 

“The  Boston  Chamber  of  Commerce  has  been  collecting 
some  data  from  state  and  federal  sources  to  show  the  bur¬ 
den  of  taxation,  which  was  borne  by  the  citizens  of  Massa¬ 
chusetts  that  year.  From  them  we  have  been  making  a  few 
calculations  that  deserve  more  than  passing  notice. 

“In  the  year  1910  the  internal  revenue  taxes  collected  in 


3  Commercial  Edition  Chicago  Herald- Examiner,  June  10,  1921. 


Cost  of  Living  Under  New  Capitalism  395 

Massachusetts  were  $7,400,000,  and  state,  county  and  local 
taxes  totaled  $85,800,000,  or  a  combined  tax  on  the  people 
of  Massachusetts  of  $93,200,000.  The  population  of  Mas¬ 
sachusetts  in  1910  was  3,366,000,  which  made  a  per  capita 
tax  of  about  $28.  Taking  the  census  figures  of  4.3  persons 
to  a  family,  the  tax  per  family  in  1910  was  $120  or  $2.30 
a  week. 

“Ten  years  later  the  federal  government  levied  on  Mas¬ 
sachusetts  for  $259,000,000  and  the  state,  county  and  local 
tax  was  $198,000,000,  or  a  total  tax  of  $457,000,000,  an 
increase  of  400  percent.  In  1920  the  population  had  in¬ 
creased  to  3,852,000,  making  the  per  capita  tax  nearly 
$120,  and  the  family  tax  approximately  $520  or  ten  dollars 
per  week. 

“It  is  idle  to  claim  that  these  taxes  are  paid  by  anyone 
but  the  ultimate  consumer  and  the  ultimate  consumer  on 
whom  the  burden  falls  the  heaviest  is  the  man  who  works 
for  wages.” 

George  Wheeler  Hinman,  writing  in  the  Herald-Ex¬ 
aminer  (February  10,  1921),  says  that  Congressman  Sisson 
told  the  House  of  Representatives  a  few  days  ago  that  the 
total  expense  of  all  the  Governments  in  the  United  States 
— national,  state,  county  and  city — are  $15,000,000,000  a 
year.  This  means  that  ‘  ‘  the  average  man  with  a  family  of 
five  has  to  pay,  in  one  way  or  another,  some  $750  as  his 
share.  He  may  pay  it  directly  in  taxes,  or  indirectly  in 
prices,  or  partly  in  taxes  and  partly  in  prices;  but  he  has 
to  pay  it  somehow.” 

Whatever  the  exact  amount  of  federal,  state,  county  and 
municipal  taxes  paid  by  the  average  family,  it  is  apparent 
that  in  the  aggregate  taxes  constitute  a  burden  of  tremen¬ 
dous  proportions,  for  the  lifting  of  which  the  New  Order 
does  not  pretend  that  it  can  fashion  an  Archimedian  lever. 
But  while  we  can  promise  no  immediate  relief  from  taxes, 
the  whole  subject  of  Taxation  will  be  studied  from  the 
standpoint  of  the  ultimate  payer  of  all  taxes — and  a  way 
may  be  found  to  lighten  the  load. 


396 


The  New  Capitalism 

The  Tariff  Tax 

Then  there  is  the  Tariff.  What  the  Tariff  means  to  the 
average  family  may  be  judged  from  the  following  excerpts 
from  a  speech  on  the  Fordney  Tax  Bill,  by  the  Hon.  Percy 
E.  Quin,  of  Mississippi,  published  in  the  Congressional 
Record ,  July  13,  1921 : 

“Today  it  takes  one-third  of  the  cost  of  all  products  to 
pay  the  railroad  transportation.  You  have  raised  the 
transportation  of  railways  more  than  $1,000,000,000  yearly, 
and  yet  in  power  all  of  this  time  and  nothing  has  been  done 
to  stop  it.  The  gentleman  from  Kansas  (Mr.  White)  yes¬ 
terday  quoted  from  the  President’s  message  where  he  said 
that  the  rates  of  transportation  would  have  to  come  down. 
This  was  one  of  the  great  evils  of  the  day.  Today  in  the 
United  States  the  annual  cost  to  the  American  people  for 
railway  transportation  is  $4,000,000,000.  The  annual  tax 
of  municipal  and  county  taxes — State  and  Federal — makes 
a  total  of  $9,000,000,000 ;  four  and  a  half  or  five  billions  of 
that  is  out  of  the  Federal  taxation  power  of  the  United 
States  Government,  and  through  this  monstrous  bill  you 
propose  to  put  through  here  you  are  going  to  take  out  of 
the  taxpayers  of  the  United  States  at  least  $3,000,000,000 
or  $4,000,000,000  more  money,  and  less  than  $500,000  or 
$600,000  of  it  will  go  into  the  Treasury  of  the  United 
States.  Where  does  the  difference  between  the  amount  that 
goes  into  the  Treasury  and  that  which  comes  out  of  the 
pockets  of  the  people  of  this  Republic  go  ?  You  are  putting 
it  into  the  coffers  of  the  rich,  the  corporations,  trusts,  and 
partnerships  of  this  Republic.” 

On  June  25,  1922,  Senator  David  I.  Walsh,  of  Massachu¬ 
setts,  made  public  statistics  showing  that  the  increased  rates 
in  agricultural  products  in  the  tariff  bill,  under  discussion 
in  the  Senate,  will  add  $13.15  annually  to  the  cost  of  living 
of  every  individual  in  the  United  States:  “At  the  very 
period  when  we  are  attempting  to  deflate  the  enormous 
costs  of  production  and  the  excess  prices  prevailing  as  a 
result  of  war  conditions,  it  is  proposed  to  increase  the  cost 


Cost  of  Living  Under  New  Capitalism  397 

of  living  to  the  American  people  to  the  extent  of  $1,316,- 
569,449  per  annum.” 

The  Tariff  question  will  be  carefully  studied  by  us — from 
the  non-investor’s  standpoint,  and  not  from  the  Capital¬ 
istic  standpoint. 

Increase  in  Price  and  Decrease  in  Quality 

But  while  our  hands  will  be  tied  for  some  years  to  come, 
with  regard  to  a  number  of  the  fortuitous  items  that  find 
their  way  into  the  cost  of  our  sundry  living  commodities, 
there  are  some  things  with  regard  to  which  we  will  be  strong 
enough  to  compel  amelioration.  For  example :  There  is 
one  point  in  the  “cost  of  living”  which  no  one  seems  so  far 
to  have  discovered  or  discussed;  nor  do  the  various  index 
numbers  take  it  into  consideration,  viz.,  that  for  a  large 
number  of  articles,  such  as  clothing,  shoes  and  sundry  kinds 
of  wearing  apparel — textiles  and  fabrics — not  only  are 
prices  practically  double  what  they  were  in  1914  but  the 
quality  has  been  materially  reduced,  thus  putting  the  whole 
nation  to  the  necessity  of  buying  approximately  double  the 
quantity.  For  all  these  items  the  increase  has  been  not  one 
hundred  percent,  but  nearer  three  hundred  percent.  Ac¬ 
cording  to  the  statisticians,  the  item  of  “clothing”  consti¬ 
tutes  about  sixteen  percent  of  the  average  family  budget; 
which  being  the  case,  the  non-investor  families  (or  wage 
earners)  pay  out  an  aggregate  of  about  four  billion  dollars. 
The  expenditure  of  about  one-half  of  this  immense  sum  is 
made  necessary  on  account  of  reductions  in  quality ,  a 
shrewd  calculation  made  by  the  Capitalistic  Entrepreneurs. 

It  is  not  to  be  supposed  for  a  minute  that  the  Capitalistic 
Entrepreneurs  reduced  quality  in  order  to  keep  a  large 
number  of  workmen  employed.  By  no  means!  They  re¬ 
duced  quality  because  it  necessitates  double  the  consump¬ 
tion — consequently  means  double  profits  to  them.  In  other 
words,  Capital,  with  regard  to  the  industries  wrhere  there 
lias  been  a  material  reduction  in  quality,  makes  twice  as 
much  as  formerly  on  the  output  per  workman ;  for  the  price 


398 


The  New  Capitalism 


of  the  present  inferior  article  is  approximately  the  same  as 
the  price  of  the  former  superior  article. 

Reduction  in  quality  (to  say  nothing  at  this  time  about 
a  noticeable  reduction  in  the  quantity  for  an  ever  increas¬ 
ing  number  of  articles)  means  the  expenditure  of  billions 
of  dollars  a  year.  We  propose  a  material  increase  in  the 
quality,  not  only  of  clothing  but  with  regard  to  many  arti¬ 
cles  of  family  use.  This  will  mean  a  tremendous  saving  in 
the  family  budget. 

My  Modest  Claim 

As  regards  the  cost  of  living  of  the  average  family:  I 
hold  that,  under  the  New  Capitalism  it  will  be  possible  to 
bring  down  prices  of  the  aggregate  living  commodities  to 
a  point  which  will  enable  the  average  family  to  save  from 
$100  to  $450  a  year.  It  may  take  from  five  to  ten  years 
before  the  maximum  figure  is  reached,  but  even  during  the 
first  five  years  the  saving  will  be  appreciable. 

It  is  not  to  be  supposed  for  a  moment  that  the  New  Order 
will  concern  itself  only  with  manufacturing  industries.  It 
will  include  within  its  sphere  of  operation,  economic  adjust¬ 
ments  in  sundry  directions.  Anything  that  has  helped  to 
increase  the  cost  of  living  unduly,  or  refuses  to  return  to 
a  more  rational  level  of  prices,  will  be  grist  for  our  mill. 
We  are  determined  to  increase  the  exchange  value  of  the 
dollar,  to  restore  its  maximum  purchasing  power.  We  pro¬ 
pose  to  revitalize  the  emaciated,  debilitated  wage  dollar,  not 
by  a  weak  saline  injection,  but  by  blood  transfusion  from 
the  giant  Capitalistic  dollar — treatment  that  may  be  a 
trifle  heroic,  but  absolutely  necessary  and  effective. 

No  Utopian  World 

Let  none  imagine  that  the  New  Order  is  in  any  way 
intended  as  a  Utopia;  let  none  delude  himself  into  think¬ 
ing  that  its  complete  success  will  usher  in  the  millennium. 
Neither  a  Utopian  world,  nor  a  millennial  heaven  on  earth 
will  result  from  the  adoption  of  my  plan.  But  it  will  bring 
the  country  back  to  a  common  sense  basis  of  business,  and 


Cost  of  Living  Under  New  Capitalism  399 


common  sense  views  of  life  will  begin  to  control  the  world. 
That  is  about  as  much  as  I  expect  to  achieve  through  the 
medium  of  my  plan.  The  New  Capitalism  is  intended  to 
usher  in  an  era  of  Common  Sense-ism — the  only  ism  that 
has  never  been  advocated — that  no  one  has  ever  suggested. 

The  New  Capitalism  is  not  a  catholicon  for  the  ills  of 
the  world.  It  is  not  an  alchemy  that  converts  dross  into 
precious  metal.  It  does  not  pretend  that  it  will  shake  Hes- 
perides  apples  into  the  lap  of  Labor.  It  holds  out  no 
promise  of  great  wealth  to  anyone.  All  it  will  aim  to  do 
is  to  place  those  who  labor  in  a  position  that  will  assure 
them  the  highest  possible  recompense  for  work  performed, 
while  enabling  them  to  live  in  decent  comfort,  and  retain 
(and  invest)  a  fair  portion  of  their  earnings,  against  the 
inevitable  ‘  ‘  rainy  day.  ’  ’ 

There  will  never  be  a  system  of  economics  that  will 
straighten  out  all  tangles,  or  be  equable  for  all.  My  plan 
is  not  calculated  to  take  care  of  the  foolish,  the  imprudent, 
the  lazy,  the  shiftless,  the  thoughtless,  the  extravagant. 
These  ye  have  always  with  you.  I  have  no  idea  how  a  man 
can  eat  his  cake  and  have  it  too.  I  know  of  no  way  in 
which  common  sense  can  be  pounded  into  the  heads  of 
foolish  people.  I  do  not  know  of  any  way  in  which  people 
can  spend  all  they  earn  or  make,  and  also  have  a  compe¬ 
tence  at  the  end  of  twenty  or  twenty-five  years — a  reserve 
fund  for  old  age,  infirmity,  sickness  and  accidents.  My 
plan,  however,  will  give  every  man  and  woman  his  or  her 
choice — each  can  choose  to  be  sensible  or  foolish — provident 
or  improvident — frugal  or  prodigal,  thrifty  or  shiftless. 
My  solace  is  that  tens  of  millions  of  those  who,  with  the 
best  of  will,  can,  under  the  present  conditions,  hardly  make 
ends  meet  or  barely  keep  the  ends  together,  will  henceforth 
be  enabled  to  save  a  fair  portion  of  their  earnings,  which 
profitably  invested,  will  secure  them  and  those  dependent 
upon  them,  against  poverty  and  wretchedness. 


CHAPTER  XXIX 

“Out  of  the  Fryihg  Pax  into  the  Fire” 


EVEN  a  cursory  examination  of  economic  history 
reveals  that  numerous  attempts  have  been  made  at 
different  times  by  the  people  of  European  nations  to 
break  and  thrust  off  the  shackles  of  their  economic  serfdom. 
Socialism  is  rampant  in  Germany.  In  Russia  the  new  eco¬ 
nomic  order  is  Bolshevism.  In  France,  we  hear,  or  at  least 
did  hear  up  to  a  few  years  ago,  much  of  Syndicalism.  In 
England  the  Guild  movement  seems  to  be  gathering 
strength.  In  Italy,  until  recently,  a  mixture  of  Socialism, 
Syndicalism,  and  Bolshevism  prevailed;  now  Fascism  is  in 
the  saddle. 

While  there  is  no  universal  agreement  with  regard  to 
principles,  nor  uniformity  as  regards  programs,  most  of  the 
economic  reform  movements  in  Europe  have  certain  ten¬ 
dencies  in  common.  Thus,  for  example,  we  observe  in 
every  country  where  the  revolutionary  spirit  is  rampant, 
a  growing  desire  on  the  part  of  the  people  to  overthrow 
their  rulers  and  the  existing  governments,  some  extreme 
doctrinaires  going  even  so  far  as  to  advocate  the  destruc¬ 
tion  of  all  government.  The  inspiration  for  this  attitude 
is  easy  to  understand  when  we  keep  in  mind  that  in  most 
European  nations  the  people  have  practically  nothing  what¬ 
ever  to  say  with  regard  to  their  own  political  affairs  and 
destinies.  They  are  subjects,  rather  than  citizens;  ruled, 
rather  than  governed.  What  makes  their  resentment  all 
the  bitterer  is  their  knowledge  that  those  who  rule  over 
them  politically,  also  rule  over  them  economically. 

The  Fallacy  of  a  Worker's  Republic 

And  so,  out  of  the  babble  of  economic  voices  across  the 
ocean,  we  can  distinctly  hear  shrill  mention  of  what  it 
pleases  some  to  call  the  rule  of  the  proletariat,  or  a  “  work¬ 
ers '  republic.”  From  the  economic  standpoint  a  “workers’ 


400 


“Out  of  the  Frying  Pan 


401 


republic”  is  at  best  a  madman’s  dream.  In  Russia  they 
tried  to  establish  one ;  with  what  success  is  generally  known. 
In  Italy,  and  in  other  countries,  several  attempts  have  been 
made  within  recent  times  on  the  part  of  groups  of  work¬ 
men,  to  take  over,  sans  ceremonie,  the  leading  industries. 
Every  such  attempt  is  bound  to  fail  ultimately ;  or  else,  to 
succeed,  must  become  a  proletarian  tyranny,  no  less  repug¬ 
nant  than  the  Capitalistic  tyranny  it  was  designed  to 
destroy. 

In  England,  if  I  may  base  my  conclusions  on  such  long¬ 
distance  studies  of  the  Guild  movement  as  I  have  been 
enabled  to  make  from  the  writings  of  such  men  as  Douglas, 
Penty,  Cole — and  others — Labor  is  preparing  for  the  day 
when  it  proposes  to  assume  active  control  of  the  industrial 
workshops.  England’s  Labor  movement  is  seemingly  bet¬ 
ter  organized  than  in  other  countries;  the  workers  have  a 
definite  plan  and  program ;  but  granting  all  this  I  can  dis¬ 
cern  no  hope  of  economic  betterment,  neither  for  the  work¬ 
ers  nor  for  England’s  general  public. 

I  may  be  wrong  as  regards  England!  but  applying  the 
principles  involved  in  the  rule  of  the  proletariat — or  a 
“workers’  republic”  to  conditions  in  the  United  States, 
and  with  -which  I  am  fairly  familiar — I  unhesitatingly  say 
a  so-called  “workers’  republic”  is  not  only  utterly  repug¬ 
nant  to  me;  but  entirely  unthinkable. 

No  Revolutionary  Program  in  the  United  States 

Briefly,  any  and  every  brand  of  revolutionary  doctrine 
or  radical  economic  reform  movement  that  may  be  defens¬ 
ible  and  perfectly  logical  in  Europe  where  political  and 
economic  conditions  are  entirely  different,  and,  it  would 
seem,  decidedly  worse  than  in  our  own  country,  is  inap¬ 
plicable  to  the  United  States,  and  cannot  succeed  here. 
True,  we  find  here  and  there  isolated  radical  groups,  whose 
leaders,  entirely  lacking  in  originality,  have  borrowed  sun¬ 
dry  tenets  from  the  various  European  revolutionary  doc¬ 
trines  and  incorporated  them  into  a  sort  of  program,  which, 
however,  makes  no  appeal  to  the  imagination  of  the  average 


402 


The  New  Capitalism 


sensible  man  and  woman;  a  program  so  extreme,  and  vio¬ 
lent,  that  it  does  not,  cannot,  and  never  will,  win  the 
approval  of  any  considerable  number  of  the  general  public 
in  the  United  States.  Rather  would  we  bear  the  ills  we 
have,  several  times  multiplied,  than  fly  to  others  that  in  all 
likelihood  would  be  more  unendurable. 

A  Fundamental  Fallacy 

In  “ industrial  socialism’ ’  I  can  discern  only  this  one 
erroneous  thought,  that  the  earth  and  all  it  can  be  made  to 
bring  forth,  belongs  to  the  industrial  workers,  and  that 
industrial  workers  have  a  prior  claim  to  the  usufruct  of  all 
Labor.  This  is  precisely  the  fallacy  upon  which  the  Cap¬ 
italistic  System  has  builded  itself.  The  principles  involved 
are  so  obviously  untenable  that  I  shall  not  delay  the  reader 
a  moment  in  emphasizing  their  falsity.  To  my  way  of 
thinking  there  is  not  the  slightest  difference  between  an 
economic  system  whose  bountiful  emoluments,  as  is  the  case 
today,  are  selfishly  pre-empted  by  a  few  million  minority 
— the  many  more  millions  majority  being  made  to  suffer — 
and  a  system  which  proposes  that  the  same  emoluments 
shall  hereafter  be  appropriated  by  a  different  minority, 
which  would  not  lighten  in  the  least,  but  make  heavier,  the 
burden  of  the  greater  majority. 

While  I  differentiate  between  industrial  socialism  and 
organized  Labor,  for  the  two  are  as  wide  apart  in  their 
ideals  and  their  policies  as  the  poles — nevertheless  I  have 
observed  that  group  dominance  and  control  of  industries  is 
not  entirely  repugnant  to  certain  Labor  groups.  Needless 
to  say,  I  do  not  sympathize  with  their  aspirations,  which  I 
think  are  based  on  insufficient  understanding  of  the  fun¬ 
damental  principles  involved,  rather  than  inspired  by  any 
evil  design. 

Economic  Amelioration  Vagaries 

But  while  we  have  not  in  the  United  States  any  organ¬ 
ized  economic  movement,  or  any  economic  doctrine  that  has 
won  for  itself  the  endorsement  and  support  of  any  con- 


“Out  of  the  Frying  Pan — ” 


403 


siderable  number. of  people,  we  have  a  rather  variegated 
collection  of  theories  and  so-called  remedies,  each  of  which 
has  succeeded  in  winning  a  limited  number  of  adherents. 
During  the  past  few  years  I  have  read  at  least  a  dozen 
books  and  articles  in  which  the  writers  suggest  various  ways 
by  which  Labor  could  get  control  of  industries — as  if  that 
in  itself  were  a  panacea  for  all  our  economic  ills.  If  there 
were  any  truth  in  that  assumption  the  people  of  Russia 
would  today  be  at  the  zenith  of  their  economic  prosperity, 
for  there  the  proletariat  has  taken  over  the  industries,  with 
what  results  to  themselves  and  the  country  is  now  pretty 
generally  understood.  But  political  and  economic  condi¬ 
tions  in  Russia  are  different  from  our  own,  and  I  do  not 
consider  it  either  fair  or  necessary  to  draw  a  parallel  be¬ 
tween  the  happenings  in  Russia  and  what  would  likely 
happen  in  our  own  country,  were  like  measures  adopted. 

With  regard  to  the  proposals  of  the  several  writers  who 
have  ventured  seriously  to  propose  the  possibility  of  Labor’s 
control  of  the  industries,  the  suggestions  they  make  seem 
plausible  enough  until  analyzed ;  and  then  they  fall  to  pieces. 
Labor  is  to  take  over  the  control — by  purchase,  I  infer — 
of  the  industries  just  as  they  are — including  overcapitali¬ 
zation,  watered  stock,  bonds,  notes,  liabilities,  cost  systems, 
overhead  expense,  fixed  charges  and  all;  the  difference 
would  be  that  the  profits  and  the  accruing  interest  and 
dividends  would  go  to  the  workingmen  instead  of  as  at 
present,  to  the  Capitalists  or  the  investors.  This  is  sup¬ 
posed  to  be  of  some  immediate  benefit  to  the  workers.  It 
isn %  as  I  shall  show ;  but  granting  for  the  moment  that  it 
would  be  of  advantage  to  the  workers,  it  would  certainly 
yield  no  benefits  and  certainly  no  advantages  to  those  not 
numbered  among  the  workers  in  the  several  industries 
taken  over.  It  would  solve  none  of  our  economic  difficulties. 
Production  costs  would  remain  the  same;  prices  of  com¬ 
modities  would  be  as  high  as  ever ;  rents  would  not  be  low¬ 
ered;  in  brief  it  would  not  decrease  the  burden  nor  lessen 
the  hardships  now  resting  on  the  average  non-investor 
family. 


404 


The  New  Capitalism 


Any  economic  scheme  that  has  for  its  immediate  objective 
an  increase  of  benefits  for  a  minority,  a  single  group,  at  the 
expense  of  the  majority  is  in  no  wise  different  from  what 
we  have  today,  and  consequently  does  not  win  my  approval. 
Any  economic  proposal  that  seeks  to  confine  its  benefits  to 
a  fraction  of  the  workers,  and  excludes  all  others  from  par¬ 
ticipation  therein,  does  not  merit  serious  consideration. 
That  is  precisely  the  trouble  now\  The  benefits  all  accrue 
to  a  group,  the  Capitalistic  group,  while  the  larger  group — 
those  who  work  for  a  wage  and  who  are  no  part  of  the 
Capitalistic  System,  must  bear  the  brunt  of  it. 

Let  us  for  a  moment  imagine  that  the  ten  million  workers 
engaged  in  the  mechanical  and  manufacturing  industries 
actually  had  gained  control,  (and  by  perfectly  legitimate 
means,  let  us  say,)  of  all  the  industries;  and  whatever 
benefits  would  accrue  would  belong  exclusively  to  the  ten 
million  workers.  Of  what  benefit  would  the  transfer  of 
control  or  ownership  be  to  twenty  or  twenty-five  million 
of  men  and  women  workers  who  are  not  engaged  in  any 
of  the  industries  concerned?  None  whatever! 

An  Economic  Experiment 

From  a  newspaper  editorial,  a  clipping,  (December  11, 
1920)  I  learn  that  an  ex-minister  in  Cincinnati  is  at  pres¬ 
ent  the  president  of  a  large  clothing  factory,  in  the  conduct 
of  which  he  applies  the  Golden  Rule.  Some  of  the  results 
noted  in  the  item  before  me  are  these:  “Wages  have  been 
increased  forty  percent.  Invested  Capital  is  earning  sixty 
percent.  Profits  above  sixty  percent  are  equally  divided 
between  owners  and  workers.  Perfect  content  reigns  in  the 
factory.  ’  ’ 

I  made  no  effort  whatever  to  look  up  this  matter,  or  make 
any  inquiries  concerning  it,  since  to  give  detailed  informa¬ 
tion  with  regard  to  the  various  economic  experiments  is  not 
included  within  the  scope  of  my  book.  I  do  not  know  what 
the  conditions  in  said  clothing  factory  are  today ;  but  assum¬ 
ing  they  are  unchanged,  and  basing  my  statement  upon 
the  meager  data  contained  in  the  newspaper  item  from 


“Out  of  the  Frying  Pan 


405 


7  7 

which  I  have  quoted,  I  would  conclude  that  the  factory  is 
conducted  in  some  respects  along  the  lines  advocated  by 
those  writers  who  consider  Labor’s  control  of  the  indus¬ 
tries  as  an  economic  remedy.1 * * * * *  If  the  statement  that  “in¬ 
vested  capital  is  earning  sixty  percent  ’ 7  is  not  an  exaggera¬ 
tion,  then  the  ex-minister  ’s  clothing  factory  is  certainly  run 
on  a  basis  calculated  to  be  of  the  greatest  advantage  to  the 
workers  ivithin  that  factory ;  in  that  case  few,  if  any, 
benefits,  redound  to  the  general  public.  Basing  my  assump¬ 
tion  entirely  upon  the  information  contained  in  the  item 
referred  to,  I  am  inclined  to  think  that  the  products  of  the 
ex-minister’s  clothing  factory  are  sold  at  approximately 
the  same  high  prices  asked  for  the  products  of  other  plants. 
If  I  am  correct  in  assuming  this,  then  the  opportunity  for 
noting  an  essential  difference  between  the  ex-minister ’s  plan 
and  my  own  plan  has  arisen.  Decent  wages  for  workers  are 
the  prime  consideration  of  my  plan ;  nor  do  I  overlook  the 
necessity  for  reasonable  profits.  But  more  important  than 
either  or  both  of  these  features  are  lower  prices  to  the 
public  for  the  commodities  produced,  for  this  alone  makes 
wages  and  profits  valuable.  It  is  not  my  plan  to  make  the 
New  Order  advantageous  only  to  certain  groups  of  indus¬ 
trial  workers,  but  to  make  it  of  the  greatest  possible  benefit 
to  all  workers — that  is — the  general  public. 

The  Deadly  Distinction 

I  want  to  emphasize  this  distinctive  feature  of  my  plan. 
If  its  successful  establishment  meant  merely  the  improved 
condition  of  small  groups  of  workers — or  the  laboring  group 
in  the  aggregate;  if  it  meant  simply  the  transference  of 
an  unjust  and  tyrannical  power  now  in  the  hands  of  the 
organized  Capitalistic  Entrepreneurs  to  the  hands  of  organ- 


i  Since  writing-  the  above  I  have  discovered  that  the  ex-minister 

is  the  Rev.  Mr.  Nash.  Besides  critical  articles  have  been  published 

about  his  plan  and  plant  in  the  Neio  Republic  and  The  Nations  with 

all  of  which,  however,  I  am  not  concerned.  I  shall  confine  myself 

strictly  to  a  discussion  of  the  principles  involved.  Nothing  that  I 

have  read  with  regard  to  the  Rev.  Mr.  Nash’s  clothing  factory  alters 

the  principles  involved  in  his  experiment. 


406 


The  New  Capitalism 


ized  Labor,  then,  economically  speaking,  the  public  in  gen¬ 
eral  would  be  no  better  off  than  it  is  today.  High  prices 
and  the  high  cost  of  living  would  still  be  evils,  all  the  more 
distressing  because  maintained  by  the  very  people  who 
complained  loudest  against  them. 

As  stated  before — I  may  be  in  error  in  having  arrived  at 
certain  conclusions  with  regard  to  the  ex-minister ’s  clothing 
factory ;  but  even  so — it  gives  me  an  opportunity  to  accen¬ 
tuate  a  point  which  I  shall  be  at  great  pains  to  make  per¬ 
fectly  clear  in  the  course  of  this  book.  We  mean,  indeed, 
to  destroy  the  unjust  and  tyrannical  power  of  the  Capi¬ 
talistic  Entrepreneur  System.  The  tremendous  power  the 
Capitalistic  Entrepreneurs  now  exercise  will  be  wielded  by 
us,  but  never  unjustly  or  tyrannically.  In  our  hands  that 
power  must  be  beneficent,  and  exercised  in  a  strictly  just 
manner  so  as  to  yield  the  greatest  good  to  the  greatest  num¬ 
ber. 

Another  point  that  I  desire  to  accentuate  on  every  pos¬ 
sible  occasion  in  the  course  of  this  book,  is  that  big 
profits  do  not  constitute  the  ultima  thule  of  my  plan.  On 
the  contrary  we  shall  strive  to  bring  about  a  condition  that 
will  considerably  reduce  the  excessive  profits  now  garnered 
by  the  Capitalistic  Entrepreneur  group;  for  it  is  quite 
provable  that  big  profits  are  the  corollary  of  high  prices  of 
the  living  commodities.  As  long  as  prices  are  high  and 
profits  big,  so  long  will  the  purchasing  power  of  the  dollar 
be  proportionately  below  par;  so  long  will  wages  have  a 
minimum  exchange  value. 

To  pay  liberal  wages  for  labor  performed  will  be  a  definite 
striving  of  my  plan — but  high  wages  are  of  no  avail  unless 
accompanied  by  a  higher  purchasing  power — a  greater  ex¬ 
change  value.  A  maximum  wage  with  a  minimum  exchange 
value  is  demonstrably  an  economic  maladjustment  of  no 
special  advantage  to  the  worker,  nor  of  benefit  to  the  public 
in  general ;  but  a  maximum  wage  with  a  maximum  exchange 
value — that  is  an  ideal  with  a  practical  purpose — an  ideal 
that  we  shall  strive  to  realize. 


“Out  of  the  Frying  Pan — ”  407 

Again  the  Question  of  Exchange 

If  it  were  possible  for  each  trade,  craft,  or  guild,  to  abso¬ 
lutely  control  its  own  industry,  and  raise  the  prices  of  its 
products  ad  libitum — and  so  add  to  its  wages  also,  enormous 
profits, — Labor  would  still  not  have  improved  its  relative 
condition  one  particle,  for  the  profits  made  by  the  workers 
in  one  craft  would  be  taken  away  by  the  workers  in  all  the 
other  crafts.  Let  us  take,  for  example,  the  clothing  indus¬ 
try.  Under  Labor ’s  control  of  the  craft,  the  profits  made  by 
the  clothing  workers  would  be  taken  away  again  by  the 
shoemakers,  the  hat  makers,  the  shirt  makers,  the  dress¬ 
makers,  the  milliners,  the  furniture  makers,  etc.,  etc.  Not 
only  that,  they  would  be  compelled  to  pay  excessively  high 
prices  for  many  things  that  are  not  produced  in  shops  and 
factories  and  mills ;  for  example,  rent,  and  the  many  prod¬ 
ucts  of  the  farm  necessary  to  their  existence.  Absolutely 
no  advantage  would  result  to  the  wage  workers  from  inde¬ 
pendent  group  control  of  the  industries;  their  economic 
condition  would  in  nowise  be  improved ;  indeed,  they  would 
be  worse  off  than  they  are  today. 

Playing  With  a  Loaded  Gun 

Labor  must  keep  these  two  essential  things  in  mind : 

1 :  That  wages  come  out  of  the  product  of  Labor  itself. 
In  other  words,  in  the  course  of  production  one  workman 
exchanges  his  labor  for  the  labor  of  other  workmen. 
When  the  hatmaker  buys  a  pair  of  shoes  he  helps  to  pay 
the  wages  of  the  shoemaker ;  and  the  shoemaker  helps  to  pay 
the  wages  of  the  hatmaker  when  he  buys  a  hat.  There  is 
no  escape  from  this  rule.  No  system  of  ^economics  can  ever 
be  devised  that  would  alter  this  exchange  of  labor  feature, 
and  its  corollary  that  the  wages  of  one  group  of  laborers 
are  ultimately  paid  by  all  the  other  laboring  groups. 

2  :  That  all  profits  come  directly  out  of  Labor ’s  wages — 
or  let  me  rather  say  out  of  the  exchange  of  wages  by  those 
who  labor  for  the  commodities  necessary  to  life.  Conse¬ 
quently  Labor  in  the  mass  would  not  improve  its  condition 


408 


The  New  Capitalism 


one  iota.  Living  costs  would  not  only  remain  at  an  abnor¬ 
mally  high  level,  but  undoubtedly  would  rise  still  higher; 
and  while  the  workers  themselves  might,  by  a  division  of 
the  profits  among  themselves,  increase  the  quantity  of  their 
wages  or  income,  they  would  be  no  better  off  at  the  end  of 
the  year,  for  their  greater  quantity  income  would  have  no 
greater  exchange  value;  and  their  savings  no  greater  pur¬ 
chasing  power. 

For  the  present  I  want  to  impress  upon  the  readers,  par¬ 
ticularly  on  those  who  are  wage  earners,  that  the  New  Order 
is  not  to  be  an  organization  of  and  for  the  exclusive  benefit 
of  workingmen,  but  of  and  for  the  benefit  of  all  those  who 
constitute  the  group  of  non-investors.  Nor  is  the  New  Capi¬ 
talism  intended  to  give  temporary  advantages  to  a  few  of 
them;  but  rather  permanent  benefits  to  all  of  them — with¬ 
out  exception. 

The  Inherent  W eakness  of  Organized  Labor 

The  inherent  weakness  of  all  Labor  organizations  lies  in 
the  fact  that  the  workers  constituting  them  have  organized 
themselves  merely  as  wage  earners.  Six  or  seven  million 
men  and  women  have  organized  to  protect  themselves  as 
wage  earners,  but  they  are  unorganized  as  consumers — as 
non-investors.  Indeed  it  could  be  demonstrated  that  the 
protection  that  Labor  has  gained  for  itself  when  serving  in 
the  capacity  of  wage  earners,  has  been  detrimental  to  the 
laborer  and  his  family  in  the  role  of  consumer  and  non¬ 
investor.  Every  advantage  that  Labor  has  gained  through 
its  organization  is  taken  away  in  its  unorganized  capacity 
as  consumer  and  non-'investor.  In  other  words,  Labor  has 
protected  itself  for  eight  hours  a  day;  but  has  left  itself 
open  to  a  thousand  attacks  during  the  remaining  sixteen 
hours  a  day.  Labor  has  protected  itself  for  2400  hours  a 
year,  but  is  absolutely  unprotected  during  6360  hours  each 
year.  Moreover,  Labor,  in  protecting  itself  during  eight 
hours,  has  been  the  innocent  cause  of  imposing  greater 
hardships  upon  a  large  percentage  of  the  non-investor 
group  of  consumers — that  group  which  is  not  organized  or 


“Out  of  the  Frying  Pan 


409 


?  1 


could  not  derive  any  immediate  benefit  whatever  from  or¬ 
ganization.  Into  this  group  I  will  put  all  the  salaried  men 
and  women,  as  well  as  those  who,  receiving  no  regular  wages 
or  salary,  derive  a  revenue  from  their  labor,  or  service,  the 
equivalent  of  a  wage  or  salary. 

But  that  is  not  the  phase  of  the  subject  that  I  desire  to 
discuss.  I  merely  want  to  emphasize  that  Labor  has  organ¬ 
ized  itself  for  collective  protection  for  eight  hours  only, 
and  left  itself  entirely  unprotected  during  sixteen  hours  a 
day.  Labor  has,  or  thinks  it  has,  protected  itself  against 
Capital,  but  I  say  that  Labor  has  not  protected  itself  against 
the  Capitalistic  System.  What  Labor  has  seemingly  won 
from  a  few  hundred  thousand  employers  is  taken  away 
from  it  by  several  million  profiteers.  Protection  during 
eight  hours ;  exploitation  during  sixteen  hours  a  day.  Labor 
collectively  is  protected  eight  hours  a  day;  the  individual 
laborer  still  remains  unprotected  the  greater  part  of  the 
day.  Let  us  take  an  average  family  of  five,  of  which  one 
is  the  wage  earner.  This  means  one  member  is  protected 
for  eight  hours  a  day  while  actively  engaged  in  the  role  of 
wage  earner;  he  is  not  protected,  and  his  organization  can 
give  him  no  protection,  during  the  other  sixteen  hours. 
And  the  other  four  members  of  his  family  remain  unpro¬ 
tected  twenty-four  hours  a  day. 

I  have  tried  to  put  my  thought  in  a  manner  easily  under¬ 
stood  by  the  average  man  and  woman.  I  call  upon  my 
readers  to  ponder  over  my  presentation  a  few  moments, 
which,  if  they  will  do,  they  wTill  clearly  see  the  point.  As 
long  as  a  wage  earner  can  give  himself  no  greater  protection 
than  at  present ;  as  long  as  he  does  not  protect  every  member 
of  his  family  every  hour  of  the  day,  so  long  will  he  have  de¬ 
rived  no  actual  benefit,  and  certainly  won  no  material  ad¬ 
vantage  from  his  organization. 

I  have  entitled  this  chapter  ‘  ‘  Out  of  the  Prying  Pan  into 
the  Fire,”  because  it  aptly  describes  the  situation,  for  if 
the  several  groups  of  wage  earners  were  in  actual  control  of 
the  industries,  and  they  would  raise  both  their  wages  and 
the  prices  of  their  products  so  that  their  aggregate  income 


410 


The  New  Capitalism 


from  these  two  sources  would  be  one-fourth  or  one-third 
higher  than  it  is  today,  they  would  still  not  have  improved 
their  own  condition,  for  the  reason  that  the  exchange  value 
of  their  wages  would  be  lower  than  ever ;  and  even  though 
their  savings  would  be  larger  than  before  (though  I  am  dis¬ 
posed  to  doubt  that)  the  purchasing  power  of  their  savings 
■would  be  considerably  less  than  it  is  today.  And  the  eco¬ 
nomic  status  of  the  millions  of  men  and  women  workers, 
those  not  engaged  in  the  manufacturing  industries,  would 
be  a  great  deal  worse. 

Briefly,  any  economic  reorganization  plan  that  does  not 
include  within  its  program  a  definite  design  to  raise  the 
exchange  value  of  wages  and  to  increase  the  purchasing 
power  of  money  (or  savings)  will  bring  no  relief  to  the 
workers  in  the  capacity  of  wage  earners,  nor  to  the  workers 
in  the  role  of  consumers  and  non-investors — that  is,  to  the 
general  public. 

The  Open  Road  to  Disaster 

It  is  to  be  noted,  too,  that  all  the  writers  who  had  visions 
of  Labor’s  control  of  the  industries  as  a  remedy  for  our 
economic  ills  have  overlooked  the  most  important  point — 
namely,  the  necessity  for  capital  and  credit.  They  have 
given  no  hint  as  to  how  the  capital  necessary  to  gain  con¬ 
trol  of  the  industries,  or  the  capital  and  credit  necessary  to 
run  them,  is  to  be  raised.  And,  most  of  all,  they  entirely 
overlooked  the  very  important  point,  viz.,  that,  even  grant¬ 
ing  the  possibility  of  group  control  of  the  several  industries, 
they  would  still  be  at  the  mercy  of  the  Capitalistic  group 
that  controls  the  system  of  banks  upon  which  they  would 
have  to  depend  for  credit  necessities,  and  to  whom  they 
would  have  to  yield  up  their  securities  as  collateral — in 
brief,  in  whose  favor  they  would  be  compelled  to  hypothe¬ 
cate  their  plants  and  business.  Foreclosures,  refusal  to 
renew  notes,  or  extend  credit  facilities,  receiverships  and 
bankruptcies  would  be  the  order  of  the  day.  Indeed,  it  is 
on  record  that  during  the  past  few  years  several  Labor 
groups  have  struck  out  for  themselves,  and  that  most  of 


“Out  of  the  Frying  Pan 


411 


»  5 


them  have  gone  to  pieces  on  the  rocks  of  insufficient  finances, 
and  credit  withdrawals,  refusals  and  curtailments.  It  is 
well  to  remember  that  it  was  by  virtue  of  their  dominant 
control  of  the  financial  resources  of  the  nation  that  the 
Capitalistic  group  attained  its  supremacy,  even  to  the 
extent  of  crushing  or  controlling  powerful  rivals — and  so- 
called  independents.  Any  economic  plan  that  disregards 
the  existence  of  this  cruel  power  is  foredoomed  to  failure. 
It  must  be  reckoned  with,  or  else  circumvented  or  check¬ 
mated. 

The  greatest  possible  stupidity  that  organized  Labor  could 
perpetrate  would  be  to  break  itself  up  into  small,  inde¬ 
pendent  units — each  group  bent  upon  getting  a  maximum 
of  revenue — ‘  ‘  all  that  the  traffic  can  bear  ’  ’ — out  of  its  par¬ 
ticular  industry.  Were  I  a  Capitalistic  Entrepreneur  I 
should  not  only  welcome,  but  do  all  in  my  power  to  encour¬ 
age  even  to  the  extent  of  financing,  so  foolhardy  a  procedure 
on  the  part  of  Labor,  for  it  would  be  the  easiest  thing  in 
the  world  to  crush  group  after  group — and,  once  crushed, 
they  would  be  out  of  harm’s  way  forevermore.  The  only 
possible  chance  that  Labor  has  to  lift  itself  out  of  eco¬ 
nomic  thraldom  is  to  constitute  itself  into  an  organized 
group;  not  to  break  itself  up  into  disintegrated  and  unre¬ 
lated  units. 


The  Lesson  of  the  Past 

Fifty  years  ago  business  was  conducted  on  an  entirely 
different  basis  than  it  is  today.  Then  business  ability,  integ¬ 
rity,  and  efficiency  of  the  proprietors  of  a  business  counted 
for  something.  Business  was  truly  competitive ;  there  was 
real  rivalry,  often  keen,  sometimes  bitter.  The  man  who 
went  into  business  provided  his  own  funds,  managed  his 
own  finances,  and  established  his  own  credit.  As  his  busi¬ 
ness  grew  he  took  in  a  partner  or  two.  Stock  companies 
were  almost  unknown.  Out  of  their  profits  they  extended 
their  business;  out  of  their  profits ,  be  it  understood.  Or, 
if  they  borrowed,  they  paid  back  what  they  borrowed  out 


412 


The  New  Capitalism 


of  their  profits.  Their  plant  was  considered  by  them  as 
their  machinery  for  making  a  fair  profit — gradually  increas¬ 
ing  their  wealth  by  increasing  the  size  of  their  plants  and 
the  volume  of  their  production.  The  foundation  of  every 
big  industry  was  laid  in  the  last  half  of  the  nineteenth 
century,  under  the  then  prevailing  system.  Most  of  the 
pioneers  were  successful  business  men — men  who  took  a 
natural  pride  in  making  a  success  of  their  business.  Finan¬ 
cially  they  were  prosperous;  they  did  not  become  mil¬ 
lionaires  over  night ;  it  took  years  to  lay  the  foundation  of 
a  fortune;  and  years  to  build  the  superstructure. 

Then  came  the  period  of  Trusts.  At  first  pools  and 
syndicates  were  formed.  Combinations  of  Capital  were 
followed  by  the  combination  of  the  important  manufac¬ 
turing  plants.  The  founders  of  the  plants,  or  their  descend¬ 
ants,  were  persuaded  by  seductive  offers  to  enter  the  com¬ 
bine.  Most  of  them  did,  accepting  as  their  reward  stock  of 
a  par  value  several  times  in  excess  of  the  actual  value  of 
their  properties  and  assets.  Many  of  the  existing  plants 
that  had  been  in  competition  with  each  other  were  deemed 
unnecessary  under  a  system  of  combination  that  was  cal¬ 
culated  to  entirely  eliminate  competition,  and  were  closed 
up  or  dismantled. 

For  several  decades  there  had  been  many  more  or  less 
successful  attempts  made  at  combination,  but  not  until  the 
organization  of  the  United  States  Steel  Corporation,  which 
combined  the  biggest  plants  in  the  most  important  indus¬ 
try  in  the  United  States  into  one  gigantic  corporation,  was 
launched,  were  the  inherent  possibilities  of  organized  com¬ 
bines  revealed.  How  the  organization  was  effected,  and 
that  it  was  successful,  is  now  pretty  generally  known.  It 
is  not  any  part  of  my  design  to  go  into  details  either  with 
regard  to  the  United  States  Steel  or  any  other  corpora¬ 
tion.  I  want  merely  to  remark  that  the  United  States 
Steel  Corporation  set  the  example.  The  ‘  ‘  reorganization ?  1 
of  most  other  industries  quickly  followed,  so  that  not  only 
the  big  industries  but  the  less  important  businesses  were 


“Out  of  the  Prying  Pan — ”  413 

organized  along  the  same  lines  as  the  powerful  combines. 
Competitive  methods  were  no  longer  a  part  of  trade  and 
commerce ;  the  semblance  alone  was  kept  up. 

Today  price  fixing  is  the  rule;  cost-finding  systems  are 
perhaps  not  uniform,  but  certainly  universal.  Items  are 
now  charged  up  against  “cost  of  production,”  and  taken 
out  of  “earnings,”  which  were  formerly  taken  out  of 
profits.  The  purchasers  of  the  commodities  produced  are 
taxed  with  sundry  items  of  “cost,”  such  as  insurance,  all 
taxes,  depreciation,  replacement,  interest  on  investment, 
interest  on  bonds,  etc.  For  the  present,  suffice  it  to  say 
that  all  the  principles  and  practices  of  the  big  fellows  have 
been  successfully  and  universally  copied  by  the  little  fel¬ 
lows.  Not  a  lesson  has  been  overlooked. 

The  Value  of  Organization 

The  most  important  lesson,  however,  and  which  has  not 
been  overlooked  by  any  one  group  of  individuals,  is  the 
lesson  of  the  importance  of  organization,  unity  and  soli¬ 
darity.  From  top  to  bottom,  business  is  organized — com¬ 
pletely,  thoroughly  organized.  The  bankers,  the  financiers, 
the  brokers,  the  producers,  the  manufacturers,  the  employ¬ 
ers,  the  wholesalers,  the  jobbers,  the  retailers,  and  even 
the  various  branches  and  departments  of  business  of  what¬ 
ever  kind — all  thoroughly  and  completely  organized — all 
constituting  a  single  system — a  harmonious  whole ;  the  con¬ 
stituents  singing  the  same  songs,  saying  the  same  prayers, 
worshiping  the  same  golden  calf — all  tied  together  by  the 
common  bond  of  self-interest  expressed  in  dollars  and 
cents — in  bigger  profits  and  greater  riches. 

There  you  have,  in  brief,  a  bird  ’s-eye  view  of  the  Capital¬ 
istic  System.  Even  those  who  cannot  be  said  to  be  either 
Capitalists  or  Entrepreneurs,  but  have  been  or  are  benefi¬ 
ciaries  of  the  System  or  its  practices,  think  in  unison,  or, 
more  properly  speaking,  they  have  their  thinking  done 
for  them  by  the  so-called  Captains  of  Industry  and  Finance, 
and  are  content  to  be  merely  echoes.  There  is  complete 


414 


The  New  Capitalism 


unanimity,  for  their  interests  are  identical.  They  are  a 
chorus  of  acquiescence,  or  agreement.  Not  a  single  dis¬ 
cordant  voice  is  lifted  at  any  of  their  banquets;  not  a  dis¬ 
senting  vote  is  heard  in  any  of  their  meetings.  There  are 
no  radicals  among  them,  no  independents,  no  dissenters, 
none  to  kick  over  the  traces. 

Every  contingent  has,  moreover,  its  own  press — a  power¬ 
ful,  well-financed  and  well-supported  press.  There  are 
hundreds  of  trade  journals,  or  journals  having  to  do  with 
the  sundry  interests  of  the  different  groups. 

The  One  Conclusion 

This  is  the  System  against  which  I  propose  that  the  non¬ 
investors  organize  themselves,  and  of  which  organization 
Labor  is  to  be  the  nucleus.  The  lesson  of  unity,  organiza¬ 
tion  and  solidarity  is  the  one  lesson  to  be  mastered.  The 
folly  of  disintegrated  and  unrelated  units  acting  independ¬ 
ently  of  each  other  must  be  apparent  to  even  the  merest 
novice.  A  solid  and  united  front  will  be  necessary  to  op¬ 
pose  the  forces  whose  strength  lies  not  so  much  in  numbers 
as  in  their  complete  homogeneity  and  their  perfect  morale. 


CHAPTER  XXX 


Economic  Changes  and  Adjustments 

HERE  is  one  phase  of  the  economic  side  of  the 


natipn’s  life  that  we  cannot  much  longer  hide  from 


ourselves.  We  are  fast  approaching  a  condition  under 
which  industrial  stagnation  in  business  will  become  more 
frequent,  and  periodical  labor  lay-offs  become  the  rule. 
Herbert  Hoover,  Secretary  of  Commerce,  in  1921  pointed 
out  that  the  present  is  the  fourteenth  industrial  depression 
we  have  had  since  the  Civil  War.  If  I  have  read  the  signs 
aright,  the  wage  earners  may  just  as  well  make  up  their 
minds  that  from  this  time  on  there  will  be  an  industrial 
disturbance  every  five  or  six  years.  It  is  inevitable  un¬ 
der  the  Capitalistic  Entrepreneur  System,  which  cannot 
flourish  under  stable  conditions.  Fluctuations — rises  and 
falls,  ups  and  downs — are  the  essence  of  the  System.  As 
an  example,  if  prices  of  stocks  remained  stable  for  two  con¬ 
secutive  years  the  stock  exchanges  would  collapse  like  so 
many  houses  of  cards.  The  immense  profits  in  the  stock 
game  are  made  out  of  fluctuations  in  market  prices. 

That  these  fluctuations  are  manipulated  is  no  secret.  If 
immense  profits  in  the  securities  market  are  derived  from 
artificial  fluctuations,  the  same  principle  can  be  applied 
with  similar  results  to  industrial  conditions.  Therefore, 
disturbances  and  crises  are  desirable  things  from  the  Cap¬ 
italistic  standpoint,  particularly  as  regards  Labor,  for,  if 
those  who  work  for  a  wage  had  five  or  ten  years  of  con¬ 
tinuous  prosperity,  they  would  acquire  so  great  a  degree 
of  economic  power,  importance  and  momentum  that  they 
could  not  be  controlled,  which  would  be  fatal  to  the  Cap¬ 
italistic  Entrepreneur  System.  The  best  way  to  keep  wage 
earners  in  the  proper  frame  of  mind,  and  docile  and  sub- 


415 


416 


The  New  Capitalism 


missive,  is  to  keep  the  prospect  of  periodical  industrial  de¬ 
pression — loss  of  jobs,  of  wages,  or  savings — hovering  con¬ 
tinually  over  their  heads. 

The  Course  of  Events 

It  is  quite  possible  that  many  who  read  this  do  not  see, 
and  are  unable  to  discover,  any  planned  design  in  the  peri¬ 
odical  industrial  depressions  that  have  afflicted  the  nation 
in  the  past,  and  so  will  not  admit  design  in  those  that  will 
afflict  the  nation — particularly  the  non-investors — in  the 
future.  Very  well!  I  shall  not  press  the  point  at  this 
time.  Indeed  I  am  quite  willing,  for  the  present,  to  confine 
myself  to  a  consideration  of  sundry  events  which  seem  to 
play  right  into  the  hands  of  the  Capitalistic  Entrepreneurs 
— events  in  the  shaping  of  wdiich  it  cannot  be  said  they  are 
playing  the  conspicuous  role  of  villain,  but  events  the  evil 
effect  of  whose  reaction  is  visited  on  the  heads  of  the  wage 
earners — the  non-investors,  the  public. 

For  example :  The  industrial  development  of  the  country 
within  the  past  twenty-five  years  has  been  phenomenal.  It 
was  not  so  much  a  gradual  growth  as  a  tremendous,  sud¬ 
den  forward  leap.  In  many  lines  of  production  the  in¬ 
crease  was  doubled  and  trebled.  I  do  not  want  to  lumber 
this  chapter  with  an  array  of  statistics.  For  this  reason  I 
refer  the  readers  to  the  latest  Statistical  Record  of  the 
Progress  of  the  United  States  as  recorded  in  the  Statistical 
Abstract  for  1922,  where  he  will  find  enough  data  to  either 
confirm  or  disprove  my  statement.  The  statistics,  if  ana¬ 
lyzed  and  correlated,  show  that  the  growth  prior  to  ]900  was 
steady  and  gradual;  the  rate  of  increase  was  normal.  But 
after  that  we  note  a  more  rapid  expansion.  While  the 
population  increased  from  75  million  in  1900  to  about  105 
million  in  1920 — an  increase  of  40  percent — the  increase 
in  our  progress  in  the  past  twenty  years  was  at  the  rate  of 
.100  to  300  and  even  more  percent.  An  admirable  record, 
surely  one  to  be  proud  of  and  rejoice  over !  But  it  cannot 
be  kept  up.  Perhaps  the  simplest  way  to  show  the  quick, 
not  to  say  sudden,  progress  is  to  point  to  the  increase  in 


Economic  Changes  and  Adjustments  417 

bank  clearings  from  $84,582,450,081  in  1900  to  $462,920,- 
250,000  in  1920. 

The  Limit  of  Healthy  Growth 

The  point  I  want  to  make  is  that  we  cannot  maintain 
the  same  percentage  of  increase;  the  tremendous  industrial, 
commercial  and  even  agricultural  expansion  during  the 
past  twenty  years  cannot  be  repeated  during  the  next 
twenty  years.  The  century  from  1800  to  1900  can  be  said 
to  have  been  the  years  of  adolescence,  of  our  “productive 
progress.”  A  study  of  the  statistics  for  the  years  from 
1900  to  1920  reveals  an  enormous  step  forward,  an  abnormal, 
not  to  say  unnatural,  increase  in  our  productive  progress, 
due  to  artificial  stimulation  through  the  medium  of  infla¬ 
tion  and  an  unusual  combination  of  circumstances  and 
events.  As  an  example,  take  the  automobile  industry. 
Twenty  years  ago  it  was  in  its  infancy.  Twenty  years  ago 
a  mere  corporal’s  guard  of  our  citizens  had  automobiles. 
Today  there  are  nine  million  pleasure  cars  in  use.  But  it 
would  be  folly  to  compute  that,  therefore,  twenty  years 
hence  eighteen  million  pleasure  cars  will  be  in  use;  and 
forty  years  hence,  thirty-six  million. 

Healthy  boys  and  girls  keep  on  growing  until  about  the 
age  of  twenty.  Then  suddenly  their  growth  stops,  and  all 
the  remaining  years  of  their  lives  will  not  add  an  inch  to 
their  height.  She,  you  will  admit,  would  be  a  foolish  mother 
who,  knowing  that  her  son  at  the  age  of  twenty  wore  trous¬ 
ers  forty  inches  in  length,  would  therefore  conclude  that 
by  the  time  he  reaches  forty  he  will  wear  trousers  eighty 
inches  in  length.  Put  into  bold  relief,  we  are  no  longer  in 
our  ’teens;  our  nation’s  “productive  progress”  has  passed 
beyond  the  “growing”  years;  we  have  transcended  the 
normal  limits  of  growth;  we  have  reached  a  point  beyond 
which,  in  the  nature  of  things,  wre  cannot  increase  in  vol¬ 
ume  or  percentage  per  capita — a  fact  which  our  purblind 
Captains  of  Finance — alias  Captains  of  Industry — refuse 
to  admit.  As  a  result  of  their  insistence  that  we  shall  con¬ 
tinue  to  grow — that  at  the  age  of  forty  we  shall  wear 


418 


The  New  Capitalism 


trousers  twice  as  long  as  we  wTore  when  we  were  twenty — 
they  have  put  the  nation  on  stilts,  and  they  are  goading  us 
on  to  a  fall. 

Speed  Without  Motion 

There  will  not  be,  there  cannot  be,  the  same  percentage 
of  increase,  neither  in  production  nor  in  manufacture, 
nor  in  sales.  Production  is  regulated  by  consumption. 
With  regard  to  many  things,  particularly  articles  of  food 
and  of  manufacture,  production  is  already  in  excess  of 
normal  consumption.  Why  blink  the  fact?  Why  lie  about 
it?  During  January  of  1920  Elbert  H.  Gary  declared 
that  during  the  next  five  years  we  would  increase  our 
crops  100  percent.  Assuming  that  we  do — who  is  going 
to  benefit  by  this  excessive  increase  in  production?  What 
are  we  going  to  do  with  the  additional  100  percent  of 
cereals,  etc.  ?  The  people  will  not  consume  twice  as  much ; 
that  is  certain.  Just  the  reverse  is  likely;  for  the  people 
are  consuming  less  and  less  on  account  of  high  prices.  Nor 
can  we  depend  on  larger  exports,  for  it  is  reasonable  to 
suppose  that  the  United  States  will  not  be  alone  in  its  in¬ 
creased  production;  other  parts  of  the  world  will  increase 
as  well.  And  certainly  the  population  of  the  United  States 
and  the  population  of  Europe  will  not  double  during  the 
next  five  years.  Who,  then,  will  be  benefited  by  a  100- 
percent  increase  in  crop  production,  with  no  proportionate 
increase  in  consumption  and  in  the  markets? 

As  late  as  June,  1921,  at  a  time  when  the  steel  mills  were 
running  at  about  20  percent  of  capacity,  Charles  M.  Schwab 
publicly  declared  that  we  were  not  producing  enough.  “We 
must  increase  our  production,”  he  said.  Increase  produc¬ 
tion  of  what?  If  Mr.  Schwab  really  believed  what  he  was 
saying,  why  didn’t  he  start  his  own  plants  going  full  tilt? 
Why  didn ’t  he  put  the  men  back  to  work  in  his  own  mills  ? 

Crying  “Wolf,  Wolf ”  When  There  is  no  Wolf 

During  and  following  the  war  we  were  told  that  there 
was  underproduction;  the  cry  was  raised  by  Chambers  of 
Commerce  and  the  sundry  sycophantic  hirelings  of  the 


Economic  Changes  and  Adjustments  419 


Capitalistic  System  that  what  was  needed  was  more  pro¬ 
duction.  Then  came  the  buyers7  strike,  and  the  retailers7 
strike,  and  the  wholesalers7  strike.  The  manufacturer  was 
caught  with  vast  quantities  of  raw  materials  and  finished 
products  in  warehouses  and  on  his  shelves.  The  retailers 
had  previously,  under  persuasion  of  manufacturers  or 
wholesalers,  stocked  up  rather  better  than  ordinarily.  The 
general  public,  too,  had  been  induced  by  the  retailer  to  buy 
double  quantities.  “Better  buy  two  or  three  pairs  of 
shoes,77  said  a  shoe  clerk  in  Chicago’s  leading  department 
store  to  me  in  January,  1919. 

“Why?77  I  queried. 

“Because  prices  are  going  to  go  still  higher.” 

“If  prices  will  go  still  higher,”  I  answered,  “it  will  be 
simply  for  the  reason  that  you  will  have  succeeded  in 
inveigling  a  sufficient  number  of  fools  into  buying  two  or 
three  pair  of  shoes  at  present  outrageously  high  prices  in 
stead  of  only  one  pair.  If  I,  and  every  other  person  in  need 
of  a  pair  of  shoes,  can  be  coaxed,  or  cajoled  into  buying 
two  or  three  pair  of  shoes,  it  means  that  your  firm  will  sell 
two  or  three  times  as  many  shoes  as  formerly;  and  the 
wholesaler  will  sell  two  or  three  times  more  shoes;  and  the 
manufacturer  likewise.  Then  the  cry  will  be  raised  that  the 
demand  is  abnormal,  and  this  will  only  help  to  keep  up 
prices.  Moreover,  your  firm  will  give  out  interviews  to  the 
press  that  the  people  are  buying  recklessly  and  extrava¬ 
gantly — two  or  three  pair  instead  of  one,  and — 77 

But  the  young  fellow  didn  7t  understand.  I  was  wasting 
my  time. 

At  any  rate,  when  the  buyers7  strike  struck  the  country 
it  became  apparent  that  there  was  not,  and  had  not  been 
at  any  time — even  when  the  cry  “we  must  produce  more” 
was  loudest — what  could  be  called  underproduction.  Pro¬ 
duction  had  always  been  equal  to,  and  even  in  excess  of, 
the  normal  demand.  The  semblance  of  underproduction 
was  created  by  the  irrational  endeavors  on  the  part  of  the 
manufacturers,  wholesalers  and  retailers  to  stimulate  and 
maintain  a  condition  of  abnormal  consumption. 


420 


The  New  Capitalism 


Precisely  what  is  the  game  ?  What  is  behind  this  studied 
attempt  on  the  part  of  certain  interests  to  give  the  impres¬ 
sion  that  there  is  underproduction  when  just  the  reverse 
is  true  ?  Are  they  themselves  deluded  ?  I  do  not  believe  it. 
Why  the  continued  deception?  Is  there  a  Senegambian  in 
the  wood-pile  ?  Then  let  us  find  him. 

To  Stimulate  Capital  Accumulations 

The  conditions  which  made  the  tremendous  sudden  in¬ 
crease  possible  during  the  past  twenty  years  are  not  in 
operation  today.  The  reaction  has  set  in.  This  reaction 
will  affect  the  various  parties  involved — the  Capitalistic 
Entrepreneurs,  the  wage  earners,  and  all  the  non-investors, 
differently.  It  is  more  than  likely  that  the  Capitalistic 
Entrepreneurs  will  put  forth  every  possible  endeavor  to 
maintain  the  same  percentage  of  increase  in  their  wealth 
accumulations  during  the  next  twenty  years  as  during 
the  past  twenty  years.  How  great  this  percentage  is  may 
be  fairly  computed  from  the  statistics  for  “  national 
wealth,”  which  was  88  billion  in  1900  and  288  billion  in 
1920 — an  average  increase  of  ten  billion  a  year. 

What  methods  will  be  employed  by  them  to  still  further 
increase  their  “national  wealth”  is  easily  guessed.  Wealth 
inflation  will  continue  at  the  same  or  a  greater  rate; 
interest  charges  will  probably  be  increased;  high  com¬ 
modity  prices,  and  rents,  also,  will  continue  ;  transporta¬ 
tion  and  freight  rates  will  remain  high ;  higher  tariffs  will 
be  added  to  “cost  of  production”;  “overhead  expense,” 
“maintenance  costs,”  “administration  expense,”  and 
“fixed  charges”  will  be  pushed  beyond  the  present  high 
figures;  and  the  quality  of  many  commodities  will  be  re¬ 
duced,  thus  putting  people  to  the  necessity  of  purchasing 
twice  as  much  as  formerly. 

The  effects  of  all  this  will  be  visited  upon  the  heads  of 
the  wage  earners  and  salaried  men  and  women,  in  brief 
will  be  felt  in  every  home  by  all  non-investors,  in  the  role 
of  consumers  during  sixteen  hours  a  day.  As  wage  earners 
or  workers  they  will  get  rather  the  worst  of  it,  in  that  they 


Economic  Changes  and  Adjustments  421 


will  be  made  to  feel  the  effects  also  while  at  work  in  mine 
or  mill,  shop  or  factory,  store  or  office.  Their  wages  will 
be  cut  to  the  bone ;  their  hours  of  labor  will  be  increased ; 
their  output  per  day,  or  week,  increased.  And,  of  course, 
for  many  there  will  be  periodical  lay-offs — longer  seasons 
of  idleness,  during  which  they  will  be  compelled  to  con¬ 
sume  their  scant  savings,  or  run  into  debt. 

The  Gapitalistic-Mammomstic  Juggernaut 

This  is  no  sickly  dream.  This  is  no  purple  prophesy. 
It  is  not  even  a  fanciful  guess ;  it  is  a  statement  of  prosaic 
fact.  The  things  I  enumerate  are  not  going  to  happen  at 
some  time  in  the  future, — they  are  happening  today ;  this 
very  hour.  They  have  been  shaping  themselves  for  over 
twenty  years  and  are  now  developed  to  a  point  of  alarm¬ 
ing  perfection.  A  little  polishing  here,  a  finishing  touch 
there,  a  tightening  of  screws  all  around,  and  the  Capital- 
istic-Mammonistic  Entrepreneur  machine  which  has  been 
building  for  more  than  twenty  years  will  be  in  smooth 
running  order — a  Juggernaut  that  crushes  and  kills  every¬ 
thing  in  its  path  as  on  it  sweeps. 

The  wage  earners  will  be,  as  they  have  always  been  in 
the  past,  the  worst  sufferers  from  the  onward  rush  of  this 
monster  machine.  They  still  have  the  power  to  stop  this 
mighty  engine  of  destruction  if  they  can  but  muster  up  the 
courage  and  develop  the  will,  to  do  it.  In  another  decade 
it  may  too  late.  But  they  must  be  made  to  understand, 
what  they  do  not  seem  thus  far  to  have  been  able  to  grasp, 
that  there  are  other  elements  than  the  item  of  wages  in¬ 
volved  in  their  economic  welfare.  There  is,  for  example, 
the  constantly  growing  menace  of  unemployment  for  an 
increasing  number. 

More  Workers  Than  Jobs — A  Capitalistic 

“Ideal” 

In  plain  English,  there  are,  and  under  the  supremacy 
of  the  Capitalistic  Entrepreneurs  there  will  continue  to 
be,  more  workers  than  jobs.  I  should  hesitate  to  put  all 


422 


The  New  Capitalism 


the  blame  for  this  state  of  affairs  on  the  Capitalistic  Entre¬ 
preneur  System,  but  there  is  considerable  evidence  that 
unemployment  of  a  certain  percentage  of  workers  has 
from  the  very  beginning  been  conspicuous  among  the 
Capitalistic  “ideals.”  When  the  great  consolidation  of 
steel  industries  took  place,  dozens  of  plants  were  closed — 
and  dismantled,  and  thousands  of  men  were  thrown  out 
of  employment.  This  was  euphemistically  called  “a  sav¬ 
ing  of  waste” — “the  doing  away  with  duplication  of 
effort,”  etc.  The  reduction  in  the  number  of  men  on 
the  payrolls  meant  a  saving,  not  of  waste,  but  of  wages — 
consequently  an  increase  of  profit. 1  The  working  day  of 
many  of  the  steel  workers  not  thrown  out  of  employment 
on  account  of  the  closing  of  plants,  was  lengthened  to  ten 
and  twelve  hours,  not  a  few  being  compelled  to  work 
seven  days  a  week.  This  system,  with  some  modifications 
made  on  account  of  public  sentiment,  is  still  in  effect  in 
most  of  the  plants  of  the  United  States'  Steel  Corporation, 
Mr.  Gary  persistently  refusing,  under  various  pretexts,  to 
inaugurate  an  eight  hour  day  for  all  wmrkers. 

An  eight  hour  day  would  mean  the  employment  of  many 
thousands  of  additional  men.  Apart  from  the  fact  that 
an  increase  in  workers  means  an  increase  in  the  size  of  the 
payroll,  which  would  produce  if  not  a  marked,  still  a 
noticeable  effect  on  the  earnings,  there  is  the  more  im¬ 
portant  consideration  that  it  would  practically  exhaust 
the  now  available  supply  of  steel  workers.  Not  that 
that  in  itself  is  a  serious  dilemma,  for  the  United  States 
Steel  Corporation  has  repeatedly  proved  that  it  is  equal 
to  any  emergency,  as,  for  example,  when,  in  1901,  in  its 
fight  on  the  unions,  it  replaced  American  workingmen 
out  of  the  foreign  labor  market. 

No,  that  isn’t  it!  The  United  States  Steel  Corporation 
has  a  reputation  to  sustain — the  reputation  of  having  for- 

i  "When  Elbert  H.  Gary  was  before  the  Lockwood  Committee  (June 
2,  1922),  Samuel  Untermyer  reminded  him  that  in  1921  the  United 
States  Steel  Corporation  had  only  45  percent  of  its  capacity  employed, 
and  yet  made  more  money  than  when  the  full  capacity  was  employed. 
This  confirms  my  own  theory  that  the  profits  of  the  Capitalistic 
Entrepreneurs  will  be  greater  when  fewer  are  employed. 


Economic  Changes  and  Adjustments  423 


mnlated  and  systematically  promulgated  a  set  of  ideals 
now  universally  adopted  by  the  entire  Capitalistic  System. 
The  particular  ideal  with  which  we  are  concerned  in  this 
chapter,  is  the  ideal  of  so  maneuvering  as  to  create  and 
maintain  a  condition  that  provides  for  “a  docile  and 
flexible  labor  supply” — in  other  words,  a  certain  percent¬ 
age  of  workers  constantly  available  to  replace  other 
workers. 

Labor  in  Competition  with  Labor 

This  “ ideal”  has  been  splendidly  maintained  thus  far. 
I  shall  make  no  stress  of  the  fact  that  in  1915  there  were 
fully  as  many  people  out  of  work  as  in  1922.  Of  greater 
significance  is  the  report  of  the  Hoover  Committee  on  the 
Elimination  of  Waste,  which  estimates  that  in  the  best 
years,  like  1917  and  1918,  there  “was  a  regular  margin  of 
unemployment  amounting  to  more  than  a  million  men.” 
This  is  the  ideal  the  Capitalistic  System  has  set  for  itself 
in  normal  times — a  condition  where  there  will  always  be 
a  margin  of  a  million  or  so  wage  earners  out  of  work, 
seeking  employment,  willing  to  take  any  job  at  the  em¬ 
ployer’s  price. 

The  consolidation  of  the  big  industries  was  brought 
about  and  justified  on  the  principle  that  it  is  ruinous  to 
have  Capital  in  competition  with  Capital ;  but  the  consoli¬ 
dators  deem  it  highly  desirable  to  have  Labor  in  competi¬ 
tion  with  Labor.  Evidently  what  is  sauce  for  the  goose 
is  not  always  sauce  for  the  gander.  When  Labor  is  in 
competition  with  Labor,  Capitalistic  Entrepreneurs  can 
urge  the  ancient  claim  that  Labor  is  a  “commodity,”  and 
that  wages  are  regulated  by  the  “law  of  supply  and  de¬ 
mand.” 

Professor  Ely,  in  his  interesting  work,  “Studies  in  the 
Evolution  of  Industrial  Society,”  says  that  Professor  John 
B.  Clark  “has  worked  out  a  theory  of  wages  which,  in  his 
opinion,  enables  us  to  ascertain  the  true  product  of  Labor, 
which  should  be  then  assigned  to  Labor.  What  Labor  re¬ 
ceives  under  perfectly  free  competition,  ‘with  Labor  ideally 


424 


The  New  Capitalism 


mobile,7  is  he  says,  the  true  product  of  Labor.  ‘The  really 
natural  standard  of  pay  lies  between  the  amount  that  idle 
men  may  here  and  there  consent  to  take  and  the  amount  that 
a  union,  which  guards  its  monopoly  by  force,  may  be  able 
to  extort ;  and  it  lies  at  about  the  level  of  what  a  union 
that  is  extended  and  efficient,  but  not  monopolistic,  can 
get.  The  standard  that  is  so  indicated  would  be  one  which 
well-constituted  courts  could  recognize,  etc.  7  7  7  2 

All  this  but  emphasizes  the  Capitalistic  Entrepreneur 
ideal  with  regard  to  Labor — an  ideal  which  the  System 
has  fully  attained;  and  the  determination  to  maintain 
which  explains  much  of  the  bitterness  of  the  fight  of  the 
Capitalistic  System  against  organized  Labor. 

“A  certain  degree  of  unemployment, 7 7  said  the  New 
York  Times  in  1921,  “is  corrective  of  many  social  dis¬ 
orders. 77  This  is  not  unlike  David  Harum’s  philosophy, 
that  ‘  ‘  a  certain  amount  of  fleas  is  good  for  a  dog ;  it  keeps 
him  from  worrying  about  being  a  dog. 77 

God  help  the  nation  that  can  devise  no  better  corrective 
for  its  social  disorders  than  wholesale  unemployment  and 
resultant  misery  and  wretchedness,  for  a  considerable 
number  of  its  families. 

“I  Die  of  Thirst  by  the  Side  of  the  Brook ” 

The  early  English  economists  rather  favored  a  high 

"birthrate,  on  account  of  the  resultant  cheapness  of  labor, 

which  would  inevitably  redound  to  the  benefit  of  the 

•/ 

Capitalists.  Quite  naturally  their  views  were  shared  by 
the  leading  statesmen — the  ruling  Capitalistic  class  of  the 
time.  In  1798  T.  R.  Malthus  published  his  “Essay  on  the 
Principle  of  Population  as  It  Affects  the  Future  Improve¬ 
ment  of  Society.77  Malthus  argued  that  “Population  has 
the  constant  tendency  to  increase  beyond  the  means  of 
subsistence77 — that  the  constant  tendency  of  all  living 

2  The  words  which  I  italicize,  viz.,  the  amount  that  "a  union 
which  guards  its  monopoly  (?)  by  force(l)  may  be  able  to  extort  (?)  ” 
are  objectionable,  and  open  to  criticism,  in  which,  however,  I  shall  not 
indulge  at  this  time ;  that  would  be  beside  the  question  imme¬ 
diately  involved  in  this  chapter. 


Economic  Changes  and  Adjustments  425 

beings  is  to  increase  faster  than  the  food  supply.  Malthus 
contended  that  population  tends  to  increase  in  a  geometri¬ 
cal  progression,  thus: 

1,  2,  4,  8,  16,  32,  64,  128 
while  the  means  of  subsistence  can  increase  only  in  an 
arithmetical  progression,  thus : 

1,  2,  3,  4,  5,  6,  7,  8. 

Almost  the  whole  so-called  thinking  world  accepted  the 
Malthusian  theory  without  cavil  or  question.  Today  it  is 
still  reverently  expounded  in  the  universities,  and  emi¬ 
nent  economists  continue  to  preach  it  not  only  in  England 
but  also  in  the  United  States,  with  this  difference,  that 
whereas  Malthus  confined  his  theory  to  a  consideration  of 
the  relation  of  the  population  to  the  means  of  subsistence 
— the  food  supply — the  modern  economists  have  given  it 
a  more  inclusive  application,  namely,  that  population  has 
the  tendency  to  increase  beyond  the  means  of  subsistence 
including  all  production;  this  in  spite  of  the  fact,  too, 
that  it  can  be  shown  by  a  wealth  of  statistics  that  Malthus’ 
fears,  at  least  as  far  as  the  United  States  is  concerned, 
were  entirely  unfounded.  The  means  of  subsistence — the 
food  supply — is  greater  per  capita  than  ever;  we  are 
producing  rather  more  than  we  can  consume.  We  are 
unable  to  find  markets  for  what  we  produce.  Millions  of 
people  throughout  the  world — slowly  starving — would 
be  glad  to  get  our  surplus,  but,  alas,  they  haven’t  the 
means,  the  money;  they  are  already  on  a  starvation  basis 
of  wages.  In  their  countries  the  Capitalistic  System  has 
been  completely  successful. 

In  brief,  in  the  United  States,  production  of  commodities 
in  general  has  outstripped  consumption;  and  not  the  re¬ 
verse,  as  so  many  Capitalistic  Entrepreneurs  and  econo¬ 
mists  would  have  us  believe.  Why  does  Mr.  Gary  seek  to 
give  the  impression  that  a  hundred  percent  increase  in 
cereals  is  needed  during  the  next  five  years?  Why  does 
Mr.  Schwab  (and  scores  of  others)  insist  that  we  are  not 
producing  enough  when  just  the  reverse  is  true?  Ask  the 
stars !  Mayhap  they  can  answer ! 


426 


The  New  Capitalism 


An  Economic  Dilemma 

The  neo-Malthusians  face  the  difficulty  more  bravely. 
They  do  not  try  to  disguise  the  fact  that  we  are  producing 
more  than  we  can  consume.  Indeed  they  attribute  the 
Capitalistic  tendency  (which  they  defend)  to  pay  nothing 
more  than  a  bare  living  wage,  to  the  over-presence  of 
workers — a  greater  supply  of  workers  than  is  needed.  And 
the  solution  they  have  to  offer  is  the  deliberate  limitation 
of  the  birth  rate — that,  or  dire  poverty  for  the  whole  tribe 
of  wage  earners. 

And  yet  the  deliberate  limitation  of  births,  it  seems  to 
me,  carries  with  it  its  own  condemnation.  Let  it  be  under¬ 
stood  that  whatever  my  private  views  may  be  with  regard 
to  the  deliberate  restriction  of  births,  in  this  book  I  shall 
not  allow  any  ethical  consideration  to  enter  in.  I  am  view¬ 
ing  the  economic  aspect  of  the  subject,  purely  from  a 
business  standpoint,  putting  it  on  its  lowest  possible  plane, 
or  rather  keeping  it  on  the  low  level  where  I  found  it. 

Keeping  all  these  things  in  mind  I  maintain  that  the 
production  of  population  (consumers)  is,  if  not  a  nation’s 
chiefest  asset,  at  least  its  most  important  industry.  When 
that  industry,  for  whatever  reason,  languishes,  economic 
disturbances  are  bound  to  result.  The  normal  progress 
of  a  nation  depends  on  the  maintenance  of  a  normal  birth¬ 
rate.  Curtailment  of  the  normal  birthrate  is  bound  to 
curtail  normal  consumption.  The  economic  equilibrium 
of  a  nation  can  be  maintained  only  as  long  as  a  nation 
does  not  neglect  the  production  of  consumers  (children). 
But  when  a  nation  increases  production  of  commodities 
and  cuts  down  the  number  of  consumers  of  the  commodi¬ 
ties,  then  something  worse  than  Malthus  foresaw  has  be¬ 
fallen  the  world. 

Olive  Schreiner,  in  her  book,  “Woman  and  Labor,”  ar¬ 
gues  that  there  is  no  need  of  maintenance  of  .what  can  be 
called  the  normal  birthrate,  for  today,  she  says,  one 
worker  produces  enough  for  ten  persons.  Not  exactly  true ! 
But — accepting  Miss  Schreiner’s  statement  as  if  it  were  an 


Economic  Changes  and  Adjustments  427 


arithmetically  correct  fact,  why  not  consider  also  its  cor¬ 
ollary,  that  if  one  worker  today  produces  for  ten  persons , 
it  follows  that  ten  consumers  are  necessary  to  consume  what 
the  one  produces.  And  how  are  we  going  to  keep  np  con¬ 
sumption  if  we  refuse  to  produce  the  ten  consumers  neces¬ 
sary  for  what  the  one  produces?  In  former  times,  if  we 
accept  Miss  Schreiner’s  loose  way  of  putting  it,  one  worker 
on  the  average  consumed  what  he  produced,  whereas  today, 
one  man  produces  for  himself  and  nine  others.  But  how 
can  we  hope  to  cope  with  this  new  situation  if  we  delib¬ 
erately  curtail  the  production  of  consumers — that  is,  if  we 
keep  down  the  birthrate? 

To  the  positive  checks  on  population  enumerated  by 
Malthus — war,  pestilence,  famine,  disease,  vice,  crime,  etc., 
— and  the  preventive  checks  urged  by  the  neo-Malthusians 
— John  Stuart  Mill  encouraged  another  check,  viz.,  that 
resulting  from  ‘  ‘  the  opening  of  industrial  occupation  freely 
to  both  sexes,”  and  which  “industrial  and  social  inde¬ 
pendence  of  women”  would  produce,  he  contended,  “a 
great  diminution  of  the  evil  of  overpopulation.” 

But  we  may  seriously  question  whether  society  as  a  whole 
is  benefited  to  any  extent  by  a  wholesale  transference  of 
those  who,  in  the  design  of  nature,  are  intended  to  be  pro¬ 
ducers  of  consumers  to  the  list  of  producers  of  commodities. 
Indeed  it  is  an  open  question  which  only  those  immediately 
concerned — the  women  themselves — can  answer,  viz., 
whether  they  themselves  are  economic  gainers  or  losers; 
and  whether,  after  all,  they  are  not  helping  with  their  own 
hands  to  set  the  stage  for  a  terrible  catastrophe  involving 
the  whole  human  race. 

Penalizing  the  Worker  for  His  Fecundity 

There  is  much  in  Malthus  ’  elaborate  treatise  on  the  Prin¬ 
ciple  of  Population  which  compels  acquiescence;  and  there 
is  much  commendable  logic  in  his  argument;  nor  was  Mal¬ 
thus  a  monster  of  unmorality,  as  some  would  have  us  be¬ 
lieve.  It  must  be  remembered  that  he  wrote  of  a  time,  and 
up  to  a  certain  period,  and  around  a  series  of  economic 


428 


The  New  Capitalism 


facts  that  were  pertinent  at  the  time  he  wrote.  Indeed 
there  are  lands  where  many  of  the  conditions  described  by 
Malthns  have  not  materially  improved  even  to  this  day. 
But  I  am  not  speaking  of  those  lands.  I  am  not  thinking 
at  this  moment  of  India,  Japan,  Russia,  China,  Turkey,  etc. 
I  am  confining  myself  strictly  to  the  United  States,  for 
which  territory  I  am  willing  to  go  on  record  as  saying  that 
for  the  next  two  centuries  the  menace  of  overpopulation 
will  not  seriously  affect  us.  My  quarrel,  if  you  care  to  call 
it  such,  is  not  with  Malthus  or  his  theory,  but  with  those 
economists  in  the  United  States  who  have  deliberately  per¬ 
verted  the  Malthusian  formula  into  an  argument  defending 
and  justifying  the  payment  of  less  than  a  living  wage  to 
the  tribe  of  workers. 

Just  read,  for  example,  the  following  from  “The  Wealth 
and  Income  of  the  People  of  the  United  States,’ ’  by  Pro¬ 
fessor  Willford  Isbell  King,  (p.  249)  : 

“Of  late  we  have  heard  a  tremendous  demand  from 
would-be  social  reformers  for  a  ‘living  wage.’  We  hear 
the  employers  on  all  sides  denounced  as  heartless  villains 
because  they  do  not  pay  enough  to  allow  their  employees  to 
live  in  decency  and  comfort.  But  this  sentiment  seems  to 
arise  from  a  superficial  analysis  of  the  difficulty.  Why  are 
the  employees  not  in  a  position  to  demand  a  satisfactory 
return  for  their  services?  Whose  fault  is  it?  And  the 
ultimate  blame  must  be  laid  not  upon  the  employers  but 
upon  the  parents  and  grandparents  of  the  workers  them¬ 
selves.  Why  did  these  ancestors  of  the  present  generation 
bring  into  the  world  children  whom  they  could  afford 
neither  to  educate  nor  to  train  for  some  occupation,  the 
products  of  which  were  sufficiently  in  demand  to  make  a 
living  wage  easily  secured  ?  Why  indeed  ?  Simply  because 
these  same  parents  and  grandparents  were  either  incom¬ 
petent,  ignorant,  or  unwilling  to  restrain  their  animal  pas¬ 
sions.  Here  we  have  an  excellent  example  of- ‘visiting  the 
iniquity  of  the  father  upon  the  children  unto  the  third  and 
fourth  generation’.” 

To  my  humble  way  of  thinking  the  emphasis  placed  by 


Economic  Changes  and  Adjustments  429 


certain  Capitalistic  economists  on  the  doctrine  of  birth 
restriction,  and  their  contention  that  wages  are  low  be¬ 
cause  there  are  too  many  workers,  is  solely  for  its  psycho¬ 
logic  effect  upon  the  workers  themselves.  If  the  haunting 
thought  that  he  himself,  and  not  the  Capitalistic  System, 
his  own  “iniquity,”  or  the  “iniquity”  of  his  ancestors, 
and  not  the  iniquity  of  the  Capitalistic  System,  is  to  blame 
for  his  economic  helplessness  and  quandary,  can  be  firmly 
rooted  into  the  consciousness  of  the  average  wage  worker, 
and  of  his  wife  and  progeny,  a  kind  of  sordid  docility 
will  eat  into  their  souls,  a  sickly  resignation  overpower  their 
wills;  after  which  their  resentment  against  the  “established 
order”  will  never  be  more  than  a  feeble  protest. 

A  Puzzling  Problem 

But  however  we  may  interpret  the  Apologia  of  the  Cap¬ 
italistic  economists  and  their  defense  of  a  system  of  wages 
notoriously  inadequate  for  decency;  however  we  may  con¬ 
temn  the  obtuseness  or  blindness  of  those  who,  in  the  face 
of  an  admitted  excessive  productive  ability,  advocate  a 
reduction  in  the  number  of  consumers,  it  cannot  be  denied 
that  the  situation  is  fraught  with  difficulties,  and  in  its 
entirety  constitutes  an  enigma  of  gigantic  proportions. 

In  the  days  of  Malthus  it  was  believed  that  the  time  was 
inevitable  when  population  would  outstrip  the  means  of 
subsistence.  Conditions  today  prove  that  just  the  reverse 
has  happened.  Production  is  vastly  greater  than  con¬ 
sumption.  There  are  more  workers  than  jobs;  more  mer¬ 
chandise  than  markets.  And  things  will  grow  rather  worse 
than  better  in  this  regard,  in  the  years  to  come. 

The  Wrong  Solution 

Perhaps  Bichard  Arkwright’s  townsfolk,  who,  as  Car¬ 
lyle  tells  us,  “rose  in  mob”  against  the  barber  inventor  of 
the  spinning  wheel  “for  threatening  to  shorten  labor,  to 
shorten  wages ;  so  that  he  had  to  fly,  with  broken  wash-pots, 
scattered  household,  and  seek  refuge  elsewhere,”  (even  his 
wife  turning  against  him) — had  a  clearer  vision  of  what 


430 


The  New  Capitalism 


was  in  store  for  them  and  their  descendants  than  we  are 
willing  to  admit,  for  is  it  not  written  that  “the  children  of 
this  world  are  wiser  in  their  generation  than  the  children 
of  light  ?  ’  ’ 

At  any  rate  it  would  seem  that  the  things  they  dreaded 
have  truly  come  to  pass  in  England,  where,  we  are  told,  a 
system  of  “ca’  canny,”  of  “go  slow,”  is  sapping  the  eco¬ 
nomic  vitality  of  the  nation.  This  is  not  because  the  Eng¬ 
lish  workmen  are  lazy,  or  unwilling  to  give  fair  service  for 
their  wage,  but  rather  because  there  are  more  workers  than 
jobs — and  by  dragging  out  their  work  they  imagine  that 
they  are  doing  a  wise  thing,  distributing  the  work  among 
a  greater  number.  A  fool  philosophy  if  ever  there  was 
one ! 

Adding  Fuel  to  the  Fire 

In  our  own  United  States  things,  economically,  are  not 
so  bad  as  in  England, — not  yet;  but,  alas,  the  fool  philos¬ 
ophy  of  the  British  workmen  is  beginning  to  manifest  itself 
in  the  muddled  minds  of  some  American  workers,  who 
imagine  that  by  prolonging  a  job  they  are — doing  what  ? — 
Helping  other  workmen?  No!  not  so  much  that  as  better¬ 
ing  their  own  condition — increasing  their  own  wages, 
obtaining  more  pay  than  they  otherwise  would  for  perform¬ 
ing  a  certain  piece  of  work.  Apart  from  the  utter  dishon¬ 
esty  of  such  a  procedure  it  is  the  stupidest  kind  of  logic. 
When  a  workman  can,  reasonably  computed,  complete  a 
given  job  in  one  day’s  time,  but  puts  in  two  days,  he  does 
not  make  himself  richer,  but  his  neighbor  poorer.  And 
when,  as  the  enemies  of  Labor  insist,  work  that  was  form¬ 
erly  performed  by  one  skilled  worker,  now,  under  restrict¬ 
ive  rules  requires  two  or  three  skilled  workmen,  a  situation 
is  created  that  is  bound  to  alienate  the  sympathy  of  the 
public,  as  well  as  weaken  Labor’s  cause. 

“In  normal  times,”  says  James  H.  Collins,  -“economists 
estimate,  if  our  industrial  organization  works  five  and  a 
half  eight-hour  days,  it  will  produce  so  much  that  the  coun¬ 
try  can  consume  only  about  four  days’  output.  One  and 


Economic  Changes  and  Adjustments  431 


one-half  days’  output  must  be  shipped  abroad.  As  we  are 
now  selling  little  abroad,  and  our  buying  power  is  at  an 
average  of  less  than  50  percent,  we  are  really  using  only 
two  days’  output.  Briefly,  there  are  more  people  in  the 
marketing  and  financial  departments  of  industry  than  are 
needed  to  do  the  business  of  the  country.  When  we  get 
back  to  normal  many  of  these  people  will  be  eliminated — 
the  high-profits  merchants  and  the  salaried  workers  who 
were  overpaid  or  rendering  no  real  service.”3 

“No  one,”  says  Professor  John  R.  Commons,  “can 
squarely  defend  all  of  the  restrictive  policies  of  unions,  but 
if  they  are  carefully  examined  .  .  .  they  will  be  found 

to  be  not  so  very  different  from  the  restrictive  policies  of 
employers  and  of  non-unionists.  In  all  cases  these  policies 
have  their  source  in  the  knoivledge  that  there  are  not ,  at  all 
times ,  enough  markets  to  take  all  of  the  work  and  the 
product  at  fair  wages  and  profitable  prices .” 

The  Pot  Calling  the  Kettle  Blach 

If  Labor  is  attempting  to  limit  production  so  that  it  will 
be  employed  twelve  months  a  year,  and  Capital  is  attempt¬ 
ing  to  speed  up  production  so  that  it  can  “lay  off”  Labor 
on  an  average  three  or  four  months  a  year — who  is  the 
greater  culprit?  On  whose  side  is  the  greater  right;  on 
whose  the  greater  wrong?  Which  group  is  more  justified? 
I  make  no  defence  and  offer  no  justification  for  either 
group.  But  while  I  am  on  this  subject  let  me  add  that  he 
wTho  can  see  any  difference  between  the  fixed  determination 
of  the  employer  to  get  as  much  work  as  possible  for  as  little 
wages  as  possible,  and  the  growing  determination  of  the 
worker  to  get  as  much  wages  as  possible  for  as  little  work 
as  possible,  has  a  finer  sense  of  moral  values  than  I  have. 

A  Eift  in  the  Clouds 

No !  this  country  is  not  suffering  from  an  excess  of  pro¬ 
ducers  so  much  as  from  a  dearth  of  consumers.  Undercon- 

3  From  “The  White  Collar  Job  and  the  Big'  Jolt,”  by  James  H. 
Collins,  Saturday  Evening  Post ,  September  3,  1921. 


The  New  Capitalism 


sumption,  rather  than  overproduction,  is  our  economic  dif¬ 
ficulty.  And  this  underconsumption  is,  in  a  great  measure, 
attributable  to  the  niggardly  wage  alloted  by  Capital  to 
those  who  labor;  and  certainly  accentuated  thereby. 

Things  cannot  go  on  forever  as  they  are  going;  there 
must  be  a  fundamental  readjustment  or  something  will 
break — something  go  to  smash.  Since  the  Capitalistic 
Entrepreneurs  have  nothing  else  to  offer  except  periodical 
unemployment  and  less  than  a  living  wrage,  it  behooves  the 
New  Order  to  “find  a  way”  out  of  the  encircling  difficulties. 

I  shall  not  particularly  emphasize  here  what  seems  to  me 
the  logical  and  basic  solution,  namely — a  greater  number 
of  marriages,  which  would  naturally  yield  an  increase  in 
the  number  of  producers  of  consumers ;  but  that  is  a  social, 
rather  than  an  economic  solution,  and  it  is  the  economic, 
rather  than  the  social,  side  of  the  problem  that  I  desire  to 
discuss.  Therefore  I  propose  as  a  possibility  under  the 
New  Order,  a  reduction  in  the  number  of  the  working  hours 
of  the  producers.  Or  it  would  be  possible  to  institute  a 
system  of  fewer  working  days.  Also  raising  the  age  limit, 
which  would  keej)  out  of  the  ranks  of  the  workers  boys  and 
girls  of  tender  years.  Also  retirement  from  active  labor 
at  an  earlier  age,  which  is  possible  only  if  wages  are  fair 
and  reasonable,  and  other  sources  of  income  have  been 
opened  to  the  workers.  These,  be  it  remembered,  are  not 
“ideals”  that  I  should  care  to  incorporate  as  tenets  of  the 
New  Order,  nor  propose  as  an  integral  part  of  my  system 
— but  I  should  certainly  advocate  them,  should  it  ever 
seem  necessary  or  desirable,  in  order  to  safeguard  the  many 
against  the  evil  of  unemployment  and  less  than  a  living 
wage — the  fecund  parents  of  misery  and  poverty. 

The  Great  Triumph 

This  brings  us  to  the  pivotal  point  of  this  whole  subject 
— the  question  of  constant  employment  of  the  workers  and 
uninterrupted  business.  I  have  said,  and  I  shall  repeat 
it  here,  that  a  system  of  fair  and  reasonable  wages,  with  a 
maximum  exchange  value,  is  preferable  to  a  system  of 


Economic  Changes  and  Adjustments  433 

excessively  high  wages  with  a  minimum  exchange  value, 
for  these  two  very  important  reasons: 

1 :  Fair  and  reasonable  wages  will  permit  the  employ¬ 
ment  of  a  larger  number  of  workers  than  would  be  possible 
under  a  system  of  excessively  high  wages. 

2 :  When  wages  are  reasonable,  prices  will  be  lower  than 
when  wages  are  excessively  high.  When  prices  are  reason¬ 
able,  people  will  buy  more.  It  is  this  purchase  stimulus 
that  keeps  the  machinery  of  industry  and  the  wheels  of 
commerce  going.  The  purchase  of  more  commodities  will 
insure,  as  nothing  else  can,  steady  prosperity  and  the  con¬ 
tinuous  employment  of  workers. 

If  nothing  else  were  to  be  gained  by  the  New  Capitalism 
than  these  two  things — the  constant  employment  of  prac¬ 
tically  all  workers,  and  continuous  business — Labor  would 
have  achieved  its  greatest  triumph. 


CHAPTER  XXXI 
What  About  the  Farmer  % 


THE  earliest  form  of  wealth  was  land.  The  first 
monopoly  was  a  land  monopoly — the  complete  own¬ 
ership  of  which  was  centered  in  a  few,  who  were 
wealthy  because  they  owned  the  land,  and  who  grew 
wealthier  from  year  to  year  because  to  them,  by  virtue  of 
their  ownership,  belonged  the  usufruct  of  the  labor  of  those 
wdio  in  order  merely  to  subsist  were  compelled  to  make 
their  land  productive.  Thus  the  economic  subjection  of 
the  populace  of  Europe,  literally  speaking,  can  be  said  to 
have  been  rooted  in  the  soil — a  subjection  which  continued 
after  the  passing  of  the  system  of  Feudalism;1  and  exists 
to  this  day,  though  in  a  more  modified  form,  in  spite  of  the 
French  Revolution  of  1789,  and  even  more  modern  revo¬ 
lutions. 

Our  Escape  from  Land  Monopoly 

Luckily  the  United  States  has  escaped  the  economic  evils 
that  arise  from  a  monopoly  of  the  land  by  a  few,  although 
a  careful  study  of  the  development  of  our  country  reveals  a 
tendency  toward  individual  ownership  of  immense  tracts 
of  land,  which  might,  in  due  time,  have  developed  into  a 
monopoly  by  a  few ;  but  a  number  of  things  saved  us  from 
this  particular  brand  of  serfdom.  Among  the  obstacles 
unfavorable  to  the  development  of  a  land  monopoly  may 
be  mentioned  the  vast  extent  of  the  territory — the  abun¬ 
dance  of  land,  its  free  and  wide  distribution,  the  difficulty 
of  access,  the  lack  of  transportation  facilities,  a  small  popu¬ 
lation,  and  a  limited  market  for  the  products  of  the  soil, 

i  I  emphasize  the  system  of  Feudalism  because  only  the  crude 
system,  or  form,  was  changed — the  principles,  practices  and  policies 
of  Feudalism  continue  to  this  day,  have,  in  fact,  been  advanced  to 
a  science. 


434 


What  About  the  Farmer? 


435 


particularly  since  many  families  owned  or  occupied  small 
tracts  of  land  which  they  cultivated.  In  1800  the  United 
States  was  considered  an  agrarian  nation,  85  percent  of 
the  population  being  listed  as  agricultural. 

But  the  one  great  thing  that  economically  intervened  and 
saved  us  from  the  menace  of  a  land  monopoly  was  the 
development  of  the  industries,  which  tempted  many  by 
offering  vastly  greater  opportunities ;  and  held  out  a  greater 
promise  of  profit  and  a  greater  reward  of  wealth  to  those 
who  had  the  courage  to  venture  upon  their  pursuit.  Never¬ 
theless  today  the  productive  farm  land  of  the  United  States 
is  widely  distributed  among  nearly  six  and  a  half  million 
owners,  whose  aggregate  wealth  is  estimated  at  eighty  bil¬ 
lion  dollars. 

The  nation  owes  a  debt  of  gratitude  to  the  farmers  of  the 
United  States,  that  wonderful  race  of  men  and  women,  who, 
in  spite  of  many  hardships  and  handicaps,  and  numerous 
discouragements,  stuck  to  the  land,  and  who  by  dint  of 
hard  toil,  patience  and  perseverance,  raised  husbandry  to 
the  dignity  of  a  great  industry.  The  Homer  who  can 
fittingly  commemorate  the  heroism  and  valor  of  those  hardy 
pioneers  into  an  epic  poem,  is  not  yet  born. 

The  Nation's  Rock  of  Gibraltar 

The  farmers  of  the  United  States  themselves  seem  not  to 
realize  that  all  these  years  they  have  stood,  and  they  stand 
today,  a  formidable  bulwark  of  safety  between  the  Mam- 
monistic  Capitalists  and  the  economic  enslavement  of  the 
nation — I  mean  that  portion  of  the  population  which  I  have 
called  the  non-investor  group,  and  to  which  the  farmers 
themselves — though  some  may  be  loath  to  admit  it — belong. 
At  any  rate,  throughout  this  book,  for  the  reasons  stated 
in  Chapter  IV,  I  have  included  the  farmers  in  the  non¬ 
investor  group.  In  spite  of  the  fact  that  the  farmers  of 
the  United  States,  strictly  speaking,  are  investors,  the 
aggregate  income  they  derive  from  their  joint  investment 
and  labor,  on  an  average  is  hardly  more  than  the  equivalent 
of  a  fair  living  wage.  From  the  1919  Income  Tax  report 


436 


The  New  Capitalism 


we  learn  that  for  the  418,945  individuals  engaged  in  “Agri¬ 
cultural  and  related  industries/’  reporting  an  income,  the 
average  net  income  was  less  than  $3000.  Taking  income 
as  a  basis,  I  think  I  am  justified  in  considering  the  group 
of  farmers,  in  spite  of  their  investment — of  an  estimated 
value  of  eighty  billion — as  wage  earners,  or  non-investors. 
And  this  classification  gains  in  merit  when  we  remember 
that  like  the  wage  earner,  the  average  farmer  has  been,  and 
is,  the  helpless  victim  of  the  Capitalistic  system;  the  foot¬ 
ball  of  the  Capitalistic  group. 

The  Rock  Shaken  by  Capitalistic  Winds 

I  have  said  that  the  people  of  the  United  States  have 
escaped  the  evil  of  land  monopoly ;  but  they  did  not  entirely 
escape  paying  the  penalty  of  a  form  of  land  monopoly  as 
sinister  as  any  to  be  found  anywhere  on  earth.  Who  owns 
the  forests,  the  oil  lands,  the  coal  and  iron  mines — the  nat¬ 
ural  resources  of  the  nation?  Not  the  farmers!  But  a 
small  coterie  of  men  who,  for  the  most  part,  have  their 
habitat  in  Wall  Street,  LaSalle  Street,  and  other  formida¬ 
ble  centers  of  finance,  and  to  whom  the  farmers,  no  less 
than  the  wage  earners,  are  compelled  to  pay  a  heavy  tribute. 

Oh,  yes !  the  farmers  own  millions  of  acres  of  productive 
land;  but  they  do  not  reap  the  full  measure  of  benefits  to 
which  they  are  entitled  as  owners  and  producers;  for  the 
same  group  of  men  who,  through  methods  we  need  not 
inquire  into  at  this  time,  have  gained  absolute  possession 
of  all  the  valuable  coal  and  iron,  oil  and  timber  lands,  also 
reap  incalculable  profits  from  the  products  of  the  lands 
owned  by  the  farmers — profits,  which,  in  point  of  quantity, 
are  as  great,  I  believe,  as  the  clear  profits  of  the  agricul¬ 
tural  owners. 

I  will  not  pause  to  dilate  on  the  mechanism  of  boards  of 
trade,  and  chambers  of  commerce,  nor  descant  on  the 
methods  of  these  institutions  through  whose  agency  the 
leading  cereal  crops  are  sold  from  five  to  ten  times  over  in 
the  course  of  a  year.  None  knows  better  than  the  farmer 
that  boards  of  trade,  and  chambers  of  commerce,  are  not 


What  About  the  Fanner? 


437 


conducted  for  the  farmer’s  benefit — and  certainly  not  for 
the  benefit  of  the  public. 

Nor  will  I  waste  any  time  on  the  commission  houses  and 
their  methods;  nor  make  any  attempt  to  show  the  sundry 
devices  by  which  immense  profits  are  made  by  a  few  thou¬ 
sand  non-producers  out  of  the  produce  of  farms — butter, 
milk,  eggs,  poultry,  fruits,  cotton,  etc. 

Nor  will  I  interrupt  the  pursuit  of  the  main  theme  of 
this  chapter  to  emphasize  the  economic  anomaly  and  gro¬ 
tesque  absurdity  of  men  living  hundreds  of  miles  from 
farms — men  who  own  nor  hoe  nor  plowT,  who  did  not  give 
so  much  as  an  hour  of  toil  to  the  tilling  of  the  soil — 
sitting  in  offices  fixing  the  prices  of  all  farm  products,  rais¬ 
ing  them  one  day,  lowering  them  the  next,  and  so  on,  mak¬ 
ing  a  profit  on  each  fluctuation.  Would  the  United  States 
Steel  Corporation  allow  farmers  to  fix  the  price  of  steel 
products?  Would  the  packers  permit  the  farmers  to  fix 
the  price  of  lard  or  pork,  or  veal,  or  canned  goods  ?  They 
would  not! 

No  wonder  the  farmers  of  the  United  States  are  banding 
themselves  into  national  organizations,  firmly  resolved  that 
hereafter  they  shall  have  something  to  say  about  the  price 
of  their  own  products.  No  wonder  they  feel  that  if  it  is 
necessary,  as  the  Capitalistic  protagonists  contend,  to  sell 
farm  crops  from  five  to  ten  times  in  the  course  of  a  year, 
that  they  themselves  mean  to  profit  thereby. 

On  the  Trail  of  Truth 

I  have  not  hesitated  in  this  book  to  tell  Capital  what  I 
think,  nor  have  I  spared  Labor  in  my  criticism.  I  would 
be  false  to  myself  if  I  did  not  also  tell  the  Farmers  the 
truth  as  I  see  it,  regarding  the  economic  situation  as  it 
affects  them,  or  as  others  are  affected  by  it.  In  all  fairness, 
therefore,  let  me  go  on  record  as  saying  that  if  the  farmers 
of  the  United  States,  through  their  national  associations, 
could  wrest  control  of  marketing  institutions  from  the 
Capitalistic  group ;  and  if  by  virtue  of  that  absolute  control 
they  themselves  would  hereafter  pocket  the  profits  which 


438 


The  New  Capitalism 


at  present  go  to  gamblers  and  speculators — the  public 
would  not  be  benefitted  one  iota.  Nothing  more  could  be 
said  to  have  happened  than  a  transference  of  large  profits 
from  the  group  of  speculators  and  gamblers  to  the  pockets 
of  the  farmers.  But  as  far  as  the  general  public  is  con¬ 
cerned,  living  costs  would  remain  practically  the  same; 
there  would  still  be  no  relief  from  high  prices. 

I  have  labored  in  this  book  to  expose  the  fundamental 
fallacies  that  have  complicated  the  whole  economic  contro¬ 
versy.  Among  other  things  I  have  shown  that  the  wage 
earner,  in  spite  of  a  high  quantity  wage,  is  no  better  off 
than  he  was  twenty  or  twenty-five  years  ago.  It  behooves 
me  now  to  apply  the  principles  vindicated  thus  far,  to  the 
situation  as  it  affects  the  farmer.  In  a  general  way  I  will 
say  that  the  farmer,  like  the  wage  earner,  is  today  precisely 
in  the  same  position  he  was  twenty  years  ago ;  he  is  no 
better  off;  he  hasn’t  advanced  a  single  step.  Indeed  I  seri¬ 
ously  question,  whether,  following  the  Capitalistic  lead,  the 
farmers  have  not  betrayed  themselves  into  self  deception. 

The  Flattery  of  Statistics 

In  spite  of  rosy  statistics  showing  a  tremendous  increase 
in  the  value  of  farm  properties — when  we  apply  the  acid 
test  we  discover  that  a  considerable  part  of  the  statistical 
increase  in  the  value  of  properties — or  in  the  wealth  of 
farmers — must  be  called  Inflation ,  that  is  to  say — is  an 
increase  in  a  theoretical  market  price  rather  than  in  value . 
That  this  increase  in  price  has  been  advantageous  to  a  lim¬ 
ited  number  of  individuals  within  the  farmer  group  goes 
without  saying;  but  it  has  brought  no  substantial  benefits 
to  the  farmers  in  the  aggregate. 

No  doubt  some  will  attempt  to  defend  the  price  increase 
by  the  notorious  1 1  law  of  supply  and  demand  ’  ’ ;  while  others 
will  urge  the  mythical  Capitalistic  device  “earning  power” 
as  the  logical  explanation.  As  regards  the  former,  viz.,  ‘  ‘  the 
law  of  supply  and  demand,”  I  shall  say  nothing  at  this 
time,  except  that  I  have  omitted  two  chapters  I  had  written 
about  it  from  this  volume,  because  I  intend,  at  some  later 


What  About  the  Farmer? 


439 


time,  to  discuss  this  damnable  “law”  in  extenso,  within  the 
proportions  of  a  fair  sized  volume.  As  regards  “earning 
power,  ’ ’  I  have  had  some  things  to  say  in  the  first  part  of 
this  book  which  may  still  be  remembered  by  the  readers. 
If  so,  it  will  suffice,  then,  to  apply  the  principles  involved  to 
the  subject  under  discussion  in  order  to  reveal  the  mockery 
of  that  Capitalistic  trick.  When  the  price  of  land  is  in¬ 
creased  on  the  basis  of  its  maximum  “earning  power,” 
quite  naturally  there  is  a  point  beyond  which  the  price  can¬ 
not  go  without  diminishing  the  normal  return  to  the  owner 
of  the  land,  thus  reducing  its  value.  This  is  precisely  what 
is  the  trouble  at  the  present  time.  So  high  has  the  price 
of  land  become  that  it  is  impossible  to  make  it  yield  a 
reasonable  return  except  by  raising  the  prices  of  all  farm 
products  to  a  practically  prohibitive  point;  which,  as  I 
shall  endeavor  to  show  in  this  and  the  next  chapter,  penal¬ 
izes  the  city  consumers  while  bringing  no  material  ad¬ 
vantage  to  the  farmers  themselves. 

Increase  in  Price — Decrease  in  Value 

Briefly  then,  as  far  as  the  farmers  in  the  aggregate  are 
concerned,  a  quantity  increase  in  the  price  of  farm  land; 
or  a  quantity  increase  in  the  prices  of  farm  products,  means 
little  or  nothing  to  the  farmers  in  the  aggregate,  for  the 
reason  that  the  purchasing  power  of  money  has  declined  to 
such  an  extent,  that  the  bigger  amount  of  money  they 
receive  either  for  their  land  or  products  has  a  minimum 
exchange  value.  It  must  be  clear  to  all  that  no  increase  in 
the  earning  power  of  productive  property  can  be  predicated, 
so  long  as  a  decrease  in  the  purchasing  power  of  the  money 
received  for  its  products  is  predicable. 

Consequently  the  value  of  land  was  no  greater  in  1920 
than  in  1900.  Only  one  thing  can  increase  its  value,  and 
that  is  a  marked  increase  in  its  productivity.  There  may 
have  been  a  slight  increase  in  this  regard  per  average  acre 
during  the  past  twenty  years,  but  certainly  not  enough  to 
justify  a  threefold  increase  in  price.  Only  one  explanation 
can  be  advanced  to  justify  the  threefold  increase  in  the 


440 


The  ]STew  Capitalism 


price  of  land,  namely  that  it  was  necessary  to  offset  the  fall 
in  the  purchasing  power  of  money,  and  so  maintain  the 
value  the  land  had  in  1900. 

The  Difference  Between  Price  and  Value 

I  shall  waste  no  time  defining  value.  To  do  so  with  any 
degree  of  completeness — to  pursue  the  chameleon  character 
of  value  through  all  its  nuances,  would  require  a  book  the 
dimensions  of  the  volume  before  you.  Rather  will  I  illus¬ 
trate  the  difference  between  price  and  value  in  a  manner 
easily  understood  by  all  already  interested.  Let  me  assume 
that  a  farmer  bought  a  farm  in  1900,  paying  a  thousand 
dollars  therefor,  and  that  he  sold  it  in  1920.  Unless  he 
received  four  thousand  dollars  he  lost  money,  for  the 
shrinkage  in  the  value  or  purchasing  power  of  money  has 
been  so  great  during  the  twenty  years  (from  1900  to  1920) 
that  four  dollars  are  but  the  equivalent  of  the  former  one 
dollar. 

Conversely,  if  a  farmer  bought  a  farm  and  paid  four 
thousand  dollars  for  it,  he  purchased  no  greater  value, 
though  paying  a  threefold  bigger  price  for  it.  For  the 
exchange  value  of  the  farmer’s  dollar  has  shrunk  as  much 
as  the  exchange  value  of  the  wage-earner’s  dollar.  Until 
this  point  is  hammered  into  the  brain  of  every  intelligent 
man  there  is  bound  to  be  much  muddled  thinking  along 
economic  and  commercial  lines,  and  “confusion  worse  con¬ 
founded.  ’  ’ 

Victim  or  Culprit ? 

It  is  clear,  from  all  this,  that  whereas  the  farmer  is 
receiving  a  considerably  larger  quantity  of  money  for  his 
property  in  a  sale,  he  is  compelled  to  pay  considerably  more 
for  whatever  property  he  may  purchase  with  the  proceeds. 
But  he  is  not  growing  richer.  He  is  not  increasing,  and 
cannot,  increase  the  purchasing  power  of  his  money — the 
exchange  value  of  his  dollars ;  and  without  any  increase  in 
these,  all  his  transactions  are  merely  an  even  exchange, 
regardless  of  the  quantity  of  money  involved. 


What  About  the  Farmer? 


441 


Who  has  disturbed  the  purchasing  power  of  money ;  who 
is  responsible  for  the  fall  in  the  exchange  value  of  the 
dollar?  Not  the  farmer ,  although  he  has  been  unjustly 
blamed  for  the  depreciation  of  the  dollar.  Indeed  I’ll 
defend  him  from  the  charge.  More  than  that,  I’ll  show 
that  not  only  has  he  not  been  benefited,  but  on  the  con¬ 
trary,  he  has  been  the  principal  sufferer  from  the  fall  in  the 
purchasing  power  of  money.  He  has  been  the  victim,  not 
the  culprit. 

The  Farmer's  Fabled  “Wealth” 

First  I  ’ll  show  that  the  farmer  was  no  wealthier  in  1920 
than  in  1900.  The  depreciation  in  the  exchange  value  of 
the  farmer’s  dollar,  and  in  the  purchasing  power  of  his 
money,  seriously  affects  the  farmer’s  wealth.  Here  are  the 
relevant  statistics: 


Number  of  Value  of  Farm 

Farms  Property 

1900  . 5,737,372  $20,439,901,164 

1910  . 6,361,502  40,991,449,090 

1920  . 6,447,998  80,500,000,000 


Please  note  the  increase  in  the  “Value  of  Farm  Prop¬ 
erty”  from  twenty  billion  in  1900  to  eighty  billion  in  1920. 
But  it  is  to  be  remembered  that  the  exchange  value,  or  pur¬ 
chasing  power,  of  the  dollar,  shrank  from  a  100  cents  value 
in  1900  to  a  value  of  about  25  cents  in  1920.2  In  other 
words,  using  the  purchasing  power  of  money  as  a  basis: 
the  twenty  billion  dollars  in  1900  had  each  a  100  cents  value, 
or  a  twenty  billion  dollar  purchasing  power;  whereas  the 
eighty  billion  dollars  in  1920  had  but  a  value  of  25  cents, 
or  a  total  of  twenty  billion  dollars  of  purchasing  power. 
In  brief,  the  seemingly  formidable  increase  from  twenty  to 
eighty  billion  dollars  was  a  theoretical  price  increase,  and 
not  an  increase  in  actual  value,  or  wealth;  a  quantity  in¬ 
crease,  not  a  purchasing  power  increase.  As  a  matter  of 

2  According  to  Professor  Kemmerer  the  dollar  in  1920  had  a 
value  of  twenty-seven  cents  as  compared  with  the  dollar  of  1896. 
But  for  the  sake  of  easy  computation  by  the  reader  I  am  taking1  the 
liberty  to  fix  the  approximate  value  of  the  1920  dollar  at  twenty-five 
cents. 


442 


The  New  Capitalism 


fact  the  eighty  billion  dollars  in  1920  had  no  greater  value, 
or  purchasing  power,  than  the  twenty  billion  dollars  in 
1900.  No  doubt  the  farmers  in  the  aggregate,  considered 
themselves  vastly  wealthier  in  1920  than  in  1900;  in  reality 
they  had  not  progressed  at  all,  for  as  regards  the  purchas¬ 
ing  power  of  their  wealth,  and  the  exchange  value  of  their 
money,  they  were  no  better  off  than  they  were  twenty 
years  ago. 

More  Money  but  Less  Purchasing  Poiver 

As  regards  his  farm  production,  unless  the  farmer  in 
1920  received  four  dollars  for  every  dollar  he  received  in 
1900,  he  is  making  less  money  than  formerly.  As  a  matter 
of  computable  fact  there  has  been  no  such  increase  in  the 
prices  of  farm  products.  The  peak  prices  the  farmer  en¬ 
joyed  for  a  brief  period  during  the  course  of  the  war, 
beyond  a  doubt  yielded  him  an  increase  in  quantity  of 
money,  but  hardly  in  purchasing  power,  as  the  following 
statistics  “Wealth  Production  of  Farms”  (Statistical  Ab¬ 
stract,  1920,  p.  180),  clearly  show: 

Wealth  Produced 
Total  Gross. 


1900  .  5,009,595,000 

1910  .  9,037,391,000 

1911  .  8,819,175,000 

1912  . .  9,342,790,000 

1913  .  9,849,513,000 

1914  .  9,984,961,000 

1915  . 10,774,491,000 

1916  . 13,406,364,000 

1917  . 19,331,000,000 

1918  . 22,480,000,000 

1919  . 24,961,000,000 

1920  . 19,856,000,000 


Since  our  comparison  is  between  1900  and  1920  we  will 
confine  ourselves  to  a  consideration  for  these  two  years  only. 
The  approximately  twenty  billions  of  wealth  the  farmers 
produced  in  1920  just  about  equalled  in  purchasing  power 
the  five  billion  they  produced  in  1900. 


What  About  the  Parmer? 


443 


No  Accruing  Benefits 

As  a  result  of  the  enormous  increase  in  the  so-called  land 
value — or  rather  market  price,  and  the  increase  of  all  indus¬ 
trial  products — considerably  greater  than  the  increase  in 
the  prices  of  his  farm  products, — the  farmer  must  borrow 
vastly  greater  sums  of  money  than  formerly.  I  do  not 
know  how  much  more  money,  but  continuing  the  ratio 
adopted  in  this  chapter  I  should  say  that  he  must  borrow 
four  dollars  where  formerly  one  dollar  sufficed.  If  in  1900 
it  was  necessary  for  him  to  borrow  a  thousand  dollars,  in 
1920  he  borrowed  four  thousand.  But  the  four  thousand 
had  no  greater  purchasing  power  or  exchange  value,  than 
the  former  one  thousand.  In  other  words  he  is  paying  inter¬ 
est  on  four  dollars  instead  of  one.  At  five  percent  he  is 
actually  paying  twenty  cents  interest,  where  formerly  he 
paid  five  cents;  twenty  dollars,  where  formerly  he  paid 
five  dollars;  two  hundred  dollars,  where  formerly  he  paid 
fifty  dollars. 

Or  reverse  the  proposition.  Let  us  suppose  that  the 
farmer  is  a  lender  instead  of  a  borrower,  and  that  he 
receives  as  interest  twenty  cents  where  formerly  he  received 
five  cents;  twenty  dollars  where  formerly  he  received  five 
dollars;  two  hundred  dollars  where  formerly  he  received 
fifty  dollars;  but  note  the  difference.  His  twenty  cents 
today  has  no  greater  purchasing  power  than  the  five  cents 
formerly;  the  twenty  dollars  will  buy  no  greater  quantity 
of  goods  than  he  could  have  bought  with  five  dollars  twenty 
years  ago;  the  two  hundred  dollars  makes  him  no  richer 
than  the  fifty  dollars  a  score  of  years  before. 

I  will  not  pause  to  inquire  whether  there  has  been  any 
material  increase  in  the  amount  of  taxes  the  farmers  paid 
in  1920  over  the  amount  they  paid  in  1900.  Let  each  farmer 
answer  for  himself.  But  if  the  tax  rate  has  been  advanced 
on  account  of  the  supposed  increase  in  the  amount  of  the 
farmers’  wealth,  or  the  supposed  increase  in  the  value  of 
their  property — (and  no  doubt  it  has)  they  were  worse  off 
in  1920  than  in  1900.  For  be  it  remembered  that  all  through 


444 


The  New  Capitalism 


the  years  the  decline  in  the  value  or  purchasing  power  of  the 
farmer’s  dollar  has  been  as  great  as  the  decline  in  the  wage 
earner’s  dollar.  The  farmers  must  never  lose  sight  of  the 
fact  that  for  them,  as  well  as  for  the  wage  earners,  the 
exchange  value  of  the  dollar,  the  purchasing  power  of 
money,  has  shrunk  considerably.  If  he  buys  he  must  pay 
so  many  more  dollars;  if  he  sells  he  receives  more  dollars, 
but  they  have  a  smaller  purchasing  power. 

The  Chief  Beneficiaries 

I  have  shown  that  the  farmer  in  reality  does  not  grow 
richer  by  a  quantity  increase  in  the  price  of  his  land;  nor 
has  he  been  benefited  by  an  increase  in  the  price  of  farm 
products.  Who,  then,  has  been  the  beneficiary  ? 

The  answer  is  simple!  The  Capitalistic  group,  or  the 
constituent  members  of  the  Capitalistic  System!  If  it 
were  possible  to  obtain  all  the  statistics  involved  it  could 
be  demonstrated  that  the  Capitalistic  group  has  for  years 
derived  profits  from  four  distinct  agricultural  sources:3 

1 :  From  speculation  in  the  principal  cereal  crops,  both 
before  and  after  they  are  harvested.4 

2 :  From  selling  and  re-selling  sundry  agricultural  prod¬ 
ucts  after  they  leave  the  farm. 

3 :  From  the  larger  quantity  of  borrowings  of  farmers,5 


3  On  account  of  the  supplementary  processess  necessarily  involved 
I  am  deliberately  excluding  manufactured  products  as  a  source  of 
profit  derived  by  the  Capitalistic  group  from  agricultural  production. 

4  Senator  Capper,  in  an  article  in  HearsCs  Magazine  (March, 
1921),  says:  “More  wheat  was  sold  in  Chicago  last  October  than 
was  raised  in  the  entire  United  States  in  1920.  Last  year’s  corn 
crop  was  sold  fourteen  times  in  Chicago  before  a  bushel  of  corn  had 
reached  the  markets.  More  than  $100,000,000  was  lost  in  three 
months  by  speculating  in  cotton  and  wheat,  nearly  half  of  which  was 
cleaned  up  by  commission  houses  and  brokers.” 

5  The  latest  census  statistics  reveal  that  the  mortgage  indebtedness 
on  farms  increased  from  $1,726,172,851  in  1910  to  $4,003,767,192  in 
1920,  or  131.9  percent.  It  is  estimated  that  the  interest  bill  of  the 
farmers  of  the  United  States  on  mortgages  and  loans  amounted  to 
about  $200,000,000  a  year. 

Since  the  above  was  written,  still  later  statistics  seem  to  indi¬ 
cate  an  even  worse  state  of  affairs.  Thus  in  an  editorial  (Hera Id- 
Examiner,  February  22,  1923)  we  read  that  the  American  farmers’ 
income  is  “nine  billion  dollars.  He  owes  twelve  and  a-  half  billion, 
his  interest  charges  are  a  Ibillion,  and  his  taxes  a  billion  and  a  quar¬ 
ter,  maybe  a  billion  and  a  half.” 

The  following  from  an  article  by  Robert  Watson  Winston,  describ¬ 
ing  conditions  in  the  state  of  North  Carolina  (see  The  Nation,  Febru¬ 
ary  21,  1923),  gives  a  poignant  picture  of  existing  conditions: 

“Tens  of  thousands  of  small  farmers  are  owned  body  and  soul 
by  the  landowner  and  the  money-lender.  Their  crop  is  mortgaged 


What  About  the  Farmer'? 


445 


and  interest  charges  vastly  greater  in  size  on  account 
of  higher  prices  of  farm  lands  and  to  enable  them  to 
purchase  the  higher  priced  implements  and  equip¬ 
ment. 

4:  From  the  higher  prices  the  farmer  must  pay  for  his 
implements,  tools,  etc.,  and,  of  course,  for  the  sundry 
articles  of  merchandise  necessary  to  his  existence. 

I  have  no  means  of  knowing  how  great  is  the  volume  of 
profit  derived  by  the  Capitalistic  group,  but  in  the  aggre¬ 
gate,  I  think,  (if  it  were  possible  to  obtain  the  actual  sta¬ 
tistics)  the  clear  profit  of  the  Capitalistic  group  is  as  great 
as  the  clear  profit  of  the  agricultural  group.  Indeed  it  is 
greater,  for,  as  I  have  already  pointed  out,  the 
dollar  in  the  hands  of  the  Capitalistic  group  has  always 
a  100  cents  value ;  whereas  in  the  hands  of  the  farmer  only 
a  fraction  of  its  original  value  remains. 

The  Capitalistic  Weather-Vane 

Is  it  possible  that  the  Capitalistic  group,  not  content  with 
the  profits  from  the  farmers’  production ,  is  now  reaching 
out  for  actual  possession  of  the  land?  Is  it  possible  that 
the  Capitalistic  System  has  formed  plans  to  capitalize  the 
productive  ability  of  the  farm  workers,  as  they  have  already 
capitalized  the  productive  ability  of  industrial  and  other 
workers?  Or  rather — to  overcapitalize  the  farming  indus¬ 
try  as  it  has  overcapitalized  the  manufacturing  industries, 
transportation  systems,  public  utilities,  etc.?  This  is  cer¬ 
tain  to  happen  if  the  various  farm  groups  succeed  in  their 
endeavors  to  control  their  output  and  the  markets,  thus 
depriving  the  Capitalistic  group  of  some  of  the  enormous 
profits  they  have  been  reaping  for  years  from  their  board 
of  trade  transactions  and  manipulations. 

Only  a  few  months  after  I  privately  expressed  the  above 
thought,  the  actual  proof  of  the  design  and  of  the  carrying 

before  it  sprouts,  and  if  cotton  and  tobacco  prices  reach  a  low  level, 
which  happens  many  years,  not  only  is  there  no  margin  over  and 
above  the  debt,  but  a  deficit  which  leaves  the  farmers  deeper  in  the 
mire  than  ever.  .  .  .  Competent  observers  have  estimated  that 

between  two  and  three  hundred  thousand  of  these  tenant  farmers — • 
'croppers,'  as  they  are  called— and  their  families  are  not  possessed  of 
the  wherewithal  for  even  the  simplest  sort  of  decent  life.” 


446 


The  New  Capitalism 


out  of  the  Capitalistic  project  fell  under  my  eyes.  In  the 
March  17,  1921,  issue  of  the  Manufacturers  Record  (Bal¬ 
timore,  Md.),  we  read: 

“  Formation  of  a  Farm  Finance  Corporation  in  South 
Carolina  to  help  handle  the  cotton  crop  of  1921  is  under 
way,  and  with  the  recent  action  of  the  South  Carolina 
Legislature  looking  to  the  standardization  of  grades  of  the 
staple  held  in  warehouses,  is  expected  to  he  completed  in 
a  short  time. 

‘  ‘  This  was  announced  here  by  Bernard  M.  Baruch,  broker, 
head  of  the  War  Industries  Board  and  of  the  economic 
division  of  the  peace  delegation  of  the  United  States,  who 
has  had  a  series  of  conferences  with  J.  S.  Wanamaker, 
president  of  the  American  Cotton  Association,  and  who 
expects  to  furnish  at  least  a  part  of  the  initial  capital  for 
the  corporation. 

“Mr.  Baruch  said  that  whatever  stock  he  purchased  in 
the  enterprise  would  be  offered  by  him  to  the  citizens  of 
South  Carolina  at  cost,  as  he  is  anxious  for  the  corporation 
to  be  controlled  entirely  within  the  state.  In  addition  to 
furnishing  a  part  of  the  necessary  capital,  Mr.  Baruch  said 
he  woidd  handle  the  securities  of  the  corporation.  Mr. 
Baruch  is  a  South  Carolinian  by  birth. 

“Asked  if  an  effort  would  be  made  to  dispose  of  all  the 
stock  within  South  Carolina,  he  said  disposal  of  the  secur¬ 
ities  would  involve  no  effort,  in  his  opinion,  and  that  he 
expected  the  stock  to  be  quickly  sold,  as  it  was  a  first  rate 
investment. 

“It  was  reported  some  weeks  ago  that  such  a  corpora¬ 
tion  was  to  be  organized  in  South  Carolina  to  handle  the 
tobacco  crop,  but  this  Mr.  Baruch  denied,  saying  that  the 
present  plan  had  doubtless  given  rise  to  this  rumor.  He 
said  the  American  Cotton  Association  had  given  its  full 
approval  to  the  scheme,  and  that  he  understood  similar 
corporations  would  be  formed  in  other  States  under  the 
auspices  of  the  association.” 


What  About  the  Farmer? 


447 


The  Capitalistic  Net 

Who  can  doubt  that  the  success  of  this  experiment  means 
its  permanent  establishment,  and  its  further  extension  to 
all  farm  properties?  Who  can  doubt  that  the  Capitalistic 
group,  having  gained  control  of  all  natural  resources,  the 
basic  materials,  and  the  industries ;  having  reached  out  and 
captured  all  the  industries,  even  those  entirely  unrelated 
to  their  original  charters — is  now  reaching  out  to  draw 
into  their  net  the  one  industry  which  thus  far  they  have 
been  unable  to  grab — the  agricultural  industry.  I  may  be 
mistaken  in  my  opinion — I  sincerely  hope  I  am — but  my 
guess  is  that  the  Capitalistic  System  is  trying  to  get  con¬ 
trol  of  and  regulate  farm  production ;  that  it  has  its  plans 
all  laid  to  organize  the  important  staple  producing  farms 
of  the  nation  on  the  same  basis  that  it  has  organized  the 
industries — viz.,  by  overcapitalization — and  issuing  im¬ 
mense  quantities  of  securities  against  the  inflation. 

While  I  believe  that  the  Capitalistic  group,  to  complete 
its  economic  conquest  of  the  nation — and  of  the  world — is 
now  reaching  out  for  the  farms — I  want  to  make  clear  the 
thought  that  is  in  my  mind.  I  do  not  think  that  the  aim  of 
the  Capitalistic  group  is  to  own  or  purchase  outright  the 
farm  lands  of  the  nations.  That  is  really  not  necessary, 
for  even  now  it  fixes  the  prices  of  the  products  of  the  farms 
and  controls  the  market,  and  that  is  sufficient  for  all  imme¬ 
diate  Capitalistic  purposes.  But  see  what  the  Capitalistic 
group  loses  by  not  being  enabled,  at  the  present  time,  to 
buy  and  sell  lands  on  the  stock  market !  What  a  splendid 
source  of  income  is  as  yet  closed  to  it!  My  guess  is  that 
within  ten  or  twenty  years  farm  lands  will  have  issued 
against  them,  stocks  and  bonds,  largely  in  excess  of  their 
present  valuation,  and  Wall  Street  will  literally  be  deluged 
with  watery  wealth. 

When  Wall  Street  Controls  the  Farms 

Why,  indeed,  should  not  all  the  productive  farm  land  of 
the  nation  be  bought  and  sold  at  least  once,  if  not  twice,  a 
year,  just  as  the  industries  and  railroad  systems  are  bought 


448 


The  New  Capitalism 


and  sold  once  or  several  times  every  twelve  months  ?  Why, 
indeed?  When  we  stop  to  reflect  that  land  tenure  today 
is  not  what  it  was  thirty  years  ago,  and  that  the  tenant 
class  is  growing,  we  begin  to  realize  that  the  first  step 
towards  a  breaking  up  of  the  diversified  land  ownership 
has  actually  been  taken,  and  as  a  result,  it  will  be  easier  to 
arrange  stock,  or  security  holdership,  in  farm  lands.  If 
one  farm  can  be  made,  with  the  Capitalistic  System  of 
figuring  “earning  power,”  “cost  of  production,”  etc.,  to 
comfortably  support  two  people,  or  rather  families,  namely 
owner  and  tenant,  it  can  be  made  to  support  a  still  greater 
number.  In  other  words  the  Capitalistic  System  is 
gradually  bringing  about  conditions  with  regard  to  farm 
lands  in  the  United  States  that,  we  may  rest  assured,  it  will 
utilize  to  its  own  great  advantage  when  it  considers  that 
the  proper  time  has  arrived. 

“Will  you  walk  into  my  Parlor f” 

Will  the  farmers  bite  on  the  bait?  Will  they  succumb 
to  the  lure  of  speculative  profits,  or  will  they  stand  firm  for 
what  is  right  and  fair  and  just  and  decent  ?  Will  they  walk 
into  the  Capitalistic  trap?  I  do  not  know,  for  human 
nature  is  weak;  and  it  is  the  common  experience  of  man¬ 
kind  that  an  appeal  to  cupidity  and  self  interest  is  gen¬ 
erally  more  successful  than  an  appeal  to  decency  and 
common  sense.  As  I  see  it  the  farmers  of  the  United  States 
have  come  to  the  parting  of  the  ways.  They  must  choose 
their  path — one  leads  to  Wall  Street  and  ultimate  ruin, 
the  other  to  actual  farm  ownership  and  safety.  Today  the 
farmers  stand  between  the  Mammonistic  Capitalists  and 
the  non-investor  group  as  the  French  soldiers  stood  against 
the  invading  German  army,  except  that  in  the  present 
situation  the  Capitalistic  group  is  the  invading  army.  And 
if  the  farmers  of  the  United  States  wish  to  save,  themselves 
as  well  as  the  nation,  there  must  come  from  their  lips,  as 
did  from  the  lips  of  the  French  soldiers  at  Verdun,  the 
chorus  cry :  ‘  ‘  They  shall  not  pass.  ’  ’  The  nation  has  its  ear 
to  the  ground! 


CHAPTER  XXXII 

Where  Will  the  Farmer  Stand? 


THERE  is  no  excuse  for  any  misunderstanding  be¬ 
tween  the  agricultural  portion  of  the  population  and 
the  industrial  portion.  It  is  to  their  mutual  interest 
that  the  farmers  and  the  wage  earners  find  the  ground  of 
common  agreement.  I  have  sought,  in  this  book,  to  impress 
upon  the  wage  earner  that  the  quantity  of  his  wages  is  of 
less  importance  than  their  exchange  value ;  and  necessarily 
so,  too,  I  would  impress  upon  the  farmer  that  high  prices 
for  his  products  carry  with  them  a  depreciated  exchange 
value — a  considerably  lessened  purchasing  power  of  his 
money.  As  I  see  it  the  farmer  should  be  just  as  much 
interested  in  the  exchange  value  of  the  workers’  wages  as 
in  the  exchange  value  of  the  prices  he  receives  for  his  prod¬ 
ucts  ;  and  the  wage  earner  should  be  just  as  much  interested 
in  the  prices  the  farmers  receive  for  their  products  as  in 
his  own  wages.  For  just  as  one  worker  exchanges  his  labor 
for  the  labor  of  other  workers,  so  the  farmer  exchanges  his 
labor  (products)  for  the  labor  (products)  of  the  workers 
in  other  branches  of  production  (industry).  The  exchange 
of  labor  and  of  labor’s  products,  is  the  sum  and  substance 
of  a  nation’s  economic  life.  The  goods  of  one  group  are 
exchanged  for  the  products  of  all  other  groups.  Unless 
goods  are  exchanged,  stagnation  sets  in. 

The  Interdependence  of  Economic  Groups 

In  other  words,  the  various  economic  groups  are  mutually 
dependent.  It  is  all  folly  to  say  that  one  group  of  pro¬ 
ducers  is  more  important  than  all  the  other  groups.  It  is 
quite  true  that  husbandry  was  the  first  industry.  Food  is 
the  first  requisite;  and  because  it  is  so  we  can  indeed  say 
that  the  farming  industry  is  of  the  utmost  importance  to 


449 


450 


The  New  Capitalism 


a  nation’s  life.  For  we  are  not  living  in  primitive  times, 
when  families  could  (and  many  did)  produce  their  own 
food  essentials,  even  depending  on  hunting  and  fishing  for 
a  part  of  their  food  supplies.  Happily  all  those  things  are 
in  the  dim  past.  The  system  of  exchange  of  products  is 
here  to  stay ;  that ’s  why  it ’s  so  great  a  pity  that  the  various 
groups  have  not  yet  grasped  the  fundamentals  involved  in 
the  interchange  transactions. 


The  Exchange  of  Products 

The  average  wage  earner  is  principally  concerned  in,  and 
most  affected  by,  prices  of  products,  whether  agricultural 
or  industrial,  that  must  be  classified  as  essential  living  com¬ 
modities,  viz.,  clothes,  food  and  shelter.  Whereas  the  aver¬ 
age  farmer  is  less  concerned  about  his  food  commodities, 
since  he  raises  them  for  himself;  and  only  in  a  moderate 
degree  in  clothes;  while  shelter  or  rent,  in  the  majority  of 
cases,  is  less  of  a  vexation  to  the  farm  owner  than  to  the 
average  wage  earning  city  dweller. 

But  on  the  other  hand  the  farmer  is  vitally  interested  in 
many  commodities  in  which  the  average  wage  earner  or  city 
dweller  has  no  direct  concern;  for  example,  in  plows,  har¬ 
nesses,  implements,  tools,  wagons,  etc.,  a  hundred  com¬ 
modities  essential  to  the  conduct  of  a  farm.1 

While  I  am  unable  to  say  what  proportion  of  their  income 
the  farmers  of  the  United  States  exchange  for  the  com¬ 
modities  produced  by  the  industrial  wage-earners,  it  is,  no 
doubt,  a  large  amount  in  the  aggregate,  as  the  following 
statistics  would  seem  to  show : 


1914 

1919 


Value  of  Farm 
Products 


Value  of  Manufactured 
Products 


$  9,894,491,000  $24,246,434,724 

19,856,000,000  62,427,905,000 


i  And  I  haven’t  said  one  word  about  the  many  commodities  that 
neither  wage  earner  nor  farmer  uses  or  purchases ;  yet  both  wage 
earner  and  farmer  are  penalized  in  that  they  ultimately  pay  the 
higher  prices,  the  higher  interest  charges  and,  of  course,  the  bigger 
profit  on  articles,  purchased,  I  might  say,  exclusively  by  the  Capital¬ 
istic  group ;  and  the  purchase  of  which  only  adds  to  the  value  of 
their  investment ;  for  example :  steel  rails,  locomotives,  engines,  ma¬ 
chinery,  etc. 


Where  Will  the  Farmer  Stand?  451 


But  even  though  the  farmers  of  the  United  States  had 
spent  every  dollar  of  the  nearly  ten  billion  they  received  in 
1914  for  their  products;  or  the  nearly  twenty  billion  they 
received  in  1919,  for  manufactured  products,  it  must  be 
remembered  that  only  a  part  of  their  purchases  are  made 
for  what  are  called  ‘  ‘  living  commodities,  ’ ’  while  a  consider¬ 
able  part  of  their  purchases  of  manufactured  goods  are 
tools,  implements,  equipment,  machinery,  etc.,  and  there¬ 
fore  less  an  expenditure  than  an  actual  investment,  which 
increases  the  value  of  their  properties.  Whereas  the  wage 
earner  can  show  neither  investment  nor  profit.  If  the 
farmer  buys  a  plow,  who  makes  a  money  profit — the  wage 
earner  ?  No !  the  Capitalistic  employer  of  those  who  made 
the  plow  makes  the  profit.  At  no  time  does  the  wage  earner 
receive  more  than  a  living  for  having  made  the  plow.2 3  And 
so  it  is  for  every  manufactured  commodity  that  the  farmer 
must  purchase.  All  the  profits  go  to  the  Capitalistic  group 
— none  of  it  to  the  wage  earner  group. 

The  Inter-Relation  of  Economic  Groups 

Moreover,  to  the  wage  earner  attaches  the  compulsion  to 
spend  all  he  earns;  and  a  fair  part  of  his  earnings  are 
expended  for  farm  products.  Of  the  approximately  forty 
million  men  and  women  “engaged  in  the  gainful  occupa* 
tions”  ten  million  are  listed  as  agricultural.  But  instead 
of  launching  a  new  division  based  on  workers ,  let  me  rather 
employ  the  simple  division  of  farm  families  and  city  fam¬ 
ilies.  In  round  numbers  there  are  ten  million  farm  families1 
and  ten  million  city  families.  Consequently  the  average 
farmer  produces  for  his  own  and  one  city  family.  Or  we 
may  express  the  formula  conversely  by  saying  that  every 

2  A  comparison  of  the  annual  revenue  of  the  six  and  a  half 
million  farm  owners  given  under  “Value  of  Farm  Products’’  (see  p. 
450),  and  of  the  wages  of  the  industrial  wage  earners  is  interesting: 

Number  of  Industrial  Total  Amount 

Wage  Earners  of  Wages 

1914  . 7,036,337 . $  4,079,332,433 

1919  . 9,098,119 .  10,545,905,000 

3  This  division  would  seem  to  embrace  farm  workers  and  farm 
owners,  and  tenant  farmers. 


452 


The  New  Capitalism 


city  family  supports  itself  and  one  farm  family.  I  will  not 
particularly  emphasize  in  this  chapter  that  the  tenant 
farmer  is  growing  more  numerous.  But  since  we  are  deal¬ 
ing  with  the  economics  involved  in  the  subject,  it  behooves 
me  to  say  that,  translated  into  clear  language,  this  would 
seem  to  indicate  an  unhealthy  tendency,  in  that  the  con¬ 
tinued  growth  of  the  tenant  farmers  would  ultimately  put 
the  average  city  family  to  the  necessity  of  supporting  two 
farm  families — owner  and  tenant. 

I  could  pursue  this  phase  of  the  subject  over  many,  many 
pages,  but  nothing  would  be  gained  thereby.  The  specific 
purpose  I  have  in  mind  is  to  emphasize  that  agricultural 
and  industrial  production  go  hand  in  hand.  The  farmers 
and  the  wage  workers  are  interdependent;  they  exchange 
their  products ;  their  interests  are  common,  mutual  and 
identical ;  their  relationship  reciprocal  and  complementary. 
There  can  be,  there  must  be,  no  conflict  between  them. 
There  is  only  one  technical  difference  between  them;  the 
industrial  workers  receive  wages ,  whereas  the  farmers  are 
dependent  upon  prices. 

Excessive  Farm  Production 

The  war  has  demonstrated  the  great  productive  ability 
of  the  farmers  of  the  United  States.  Not  only  does  their 
normal  production  adequately  supply  the  normal  needs  of 
our  own  population,  but  a  surplus  remains  for  export. 
With  intensified  production  our  farms  could  easily  produce 
enough  to  supply  a  considerably  greater  number  of  people. 
If  there  is  any  logic  in  the  Malthusian  theory  that  the  con¬ 
stant  tendency  of  a  nation’s  population  is  to  outstrip  its 
food  supply,  the  farmers  have  shown  that  we  need  not  waste 
any  of  our  time  in  worry.  Considering  their  wonderful 
productive  ability,  so  splendidly  proved  during  the  period 
of  the  war,  neither  this  generation  nor  the  next,  nor  the 
next,  will  be  subjected  to  suffering  on  account  of  an  inade¬ 
quate  farm  production. 


Where  Will  the  Farmer  Stand*?  453 


A  Disastrous  “Remedy” 

The  particular  menace — and  it  is  not  a  purely  theoretical 
condition — that  hangs  over  the  farmers  of  the  United  States 
today,  is  that  their  normal  production  is  greater  than  the 
consumption.  So  real  is  this  menace  that  no  less  a  person 
than  the  Secretary  of  the  Department  of  Agriculture, 
Henry  C.  Wallace,  himself  a  farmer,  or  at  least  publisher 
of  several  farm  papers,  and,  therefore,  supposed  to  be 
conversant  with  farming  conditions  in  his  own  state  as  well 
as  with  the  farm  situation  throughout  the  nation,  recently 
suggested  that  production  of  some  of  the  cereals  be  cur¬ 
tailed  25  percent.  The  dominant  idea  in  Secretary 
Wallace’s  mind  when  he  made  the  suggestion,  was  that  by 
the  deliberate  curtailment  of  output  prices  of  farm  products 
would  remain  nearer  to  the  level  of  war  time  prices.  Secre¬ 
tary  Wallace,  no  doubt,  believes  that  curtailed  farm  pro¬ 
duction  is  to  the  farmers’  interest.  A  moment’s  reflection 
reveals  the  fallacy  of  his  proposal. 

When  Secretary  Wallace  advocates  a  25  percent  less 
farm  production  for  the  purpose  of  keeping  up  high  prices 
for  farm  products  he  entirely  overlooks  the  city  dwellers, 
who  would  be  compelled  to  pay  materially  increased  prices 
in  consequence  of  a  lessened  production.  He  also  seems  to 
forget  that  the  materially  increased  prices  for  farm  prod¬ 
ucts,  as  a  result  of  curtailed  production,  would  automatic¬ 
ally  lessen  consumption.  In  the  end,  neither  producer  nor 
consumer  would  be  benefited  economically. 

It  is  an  absolute  certainty  that  the  average  city  worker 
(wage  earner)  cannot  increase  the  amount  of  money  he  pays 
for  farm  products.  According  to  Government  statistics 
the  average  family  pays  40  percent  of  its  family  income  for 
food.  If  the  family  income  is  $1000 — then  $400  goes  for 
food  products.  If  the  family  income  is  $1500 — then  $600  goes 
for  food  products.  Assuming  that  the  average  wage  earner ’s 
income  is  sufficient  to  meet  the  living  costs  of  an  average 
family,  he  is  paying  forty  cents  out  of  every  dollar  he  earns 
merely  for  food.  I  do  not  mean  to  say  that  all  of  this  amount 


454 


The  New  Capitalism 


goes  directly  to  the  farmer,  for  many  of  the  farm  products 
are  subjected  to  manufacturing  processes,  and  go  through 
the  hands  of  middlemen  before  ultimately  reaching  the 
wage  earner’s  table;  but  it  cannot  be  denied  that  a  consid¬ 
erable  part  of  the  40  percent  expended  by  an  average  family 
for  food,  goes  to  the  farmer. 

Reduced  Wages  Curtail  Consumption 

Now  that  wages  have  been  reduced  from  25  to  50  percent, 
for  practically  the  whole  tribe  of  city  workers, — wage  earn¬ 
ers  as  well  as  small  salaried  employees, — the  family  income 
will  be  less.  This  reduction  in  income,  even  though  still  40 
percent  were  figured  as  applying  to  the  item  food,  would 
necessarily  reduce  the  amount  spent  by  an  average  family 
for  food.  If  a  worker’s  family  income  in  1920  was  $1500, 
and  he  spent  40  percent,  or  $600  for  food;  and  his  income 
is  cut  to  $1000,  still  spending  40  percent  he  automatically 
cuts  down  the  food  allowance  to  $400.  But  if  prices  remain 
approximately  as  they  were  when  his  income  was  $1500,  a 
cutting  down  in  the  quantity  of  consumption  is  imperative. 

A  Remedy  W orse  than  the  Disease 

Let  me  illustrate  in  the  simplest  possible  way  why  farmers 
would  not  benefit  by  deliberately  curtailing  their  produc¬ 
tion.  Let  us  assume  for  the  purpose  of  this  illustration 
that  the  nearly  six  and  a  half  million  farm  owners  in  a  given 
year  raise  800,000,000  bushels  of  wheat — a  normal  crop,  let 
us  call  it ;  and  that  the  price  is  one  dollar  a  bushel.  Then 
it  occurs  to  them  that  by  cutting  down  production  by  one 
half,  the  price  will  be  two  dollars  per  bushel.  The  result, 
then,  would  be  a  400,000,000  bushel  crop,  for  which  they 
would  receive  as  much  at  two  dollars  a  bushel  as  they  re¬ 
ceived  the  year  before  for  800,000,000  at  one  dollar  a  bushel. 
You  will  observe  that  in  the  aggregate  they  do.  not  receive 
any  greater  quantity  of  money  in  spite  of  the  higher  prices 
they  received. 

But  let  us  assume  that  on  account  of  the  great  scarcity 
created  by  the  deliberate  reduction  in  production  the  price 


Where  Will  the  Farmer  Stand?  455 


of  wheat  would  go  to  three  dollars  a  bushel.  Would  they 
receive  $1,200,000,000  for  their  400,000,000  bushels?  No !  for 
there  would  be  so  decided  a  drop  in  consumption  as  to  nat¬ 
urally  cut  down  their  sales ;  for  it  is  to  be  remembered  that 
thus  much  and  no  more  can  the  average  wage  earner  spend 
for  food.  Consequently,  if  prices  of  food  products  go  up  he 
purchases  less  quantity.  Or  he  might  insist  on  wrage  in¬ 
creases  to  enable  him  to  purchase  the  usual  quantity  of  food ; 
but  in  that  case  the  prices  of  all  non-food  commodities 
which  the  farmers  must  normally  purchase,  would  advance, 
and  the  greater  quantity  of  money  the  farmer  receives  for 
his  wheat,  would  disappear  in  the  greater  amount  he  must 
pay  for  what  he  must  purchase. 

The  curtailment  remedy  defeats  its  own  purpose;  is,  in 
brief,  no  remedy  at  all.  The  argumentative  farmer  might 
say  that  for  the  smaller  crop  he  will  require  less  seed  and 
only  half  the  land;  and  of  course  his  work  is  cut  down  by 
one  half.  Quite  true!  but  that  way  lies  the  road  to  ruin, 
which  may  indeed  be  delayed  a  few  years,  but  in  the  end 
disaster  will  surely  overtake  him.  Let  those  who  are  wise 
read  as  they  run. 

Two  Formulas 

The  ideal  formula,  and  to  the  maintenance  of  which  the 
farmers  should  bend  their  efforts,  is,  normal  production, 
normal  prices,  and  normal  consumption.  Tamper  with  this 
formula  and  trouble  ensues — trouble  for  all  concerned.  I 
lay  it  down  as  an  axiom,  that  the  economic  equilibrium  can¬ 
not  be  disturbed  with  impunity — the  penalty  must  be  paid 
sooner  or  later,  not  only  by  one  party  but  by  all  parties 
concerned.  This  must  be  clear  to  everyone  who  is  not 
utterly  devoid  of  common  sense,  not  to  speak  of  logic.  Judge 
for  yourself.  Assume,  for  the  moment,  normal  production 
and  abnormal  prices.  The  result  is  subnormal  consumption, 
and  that  means  if  not  absolutely  a  less,  at  least  no  greater, 
income  for  the  producer,  to  say  nothing  of  the  incidental 
suffering  of  the  victims  of  a  less  than  normal  consumption. 

But  the  viciousness  of  Secretary  Wallace’s  proposal  be- 


456 


The  New  Capitalism 


comes  apparent  when  one  reduces  it  to  a  formula.  What  he 
proposes  is  subnormal  production,  attended  by  abnormal 
prices.  This  would  lower  still  more  an  already  subnormal 
consumption.  It  would,  moreover,  intensify  the  suffering 
of  the  wage  earner  families — and  visit  deleterious  conse¬ 
quences  upon  their  constituent  members — particularly  the 
children.  But  overlooking  this  fact,  which  belongs  rather 
to  the  realms  of  sociology  than  economics, — clearly  the  pro¬ 
ducing  farmers  would  not  be  the  beneficiaries  of  any  arbi¬ 
trary  system  which  may  best  be  expressed  as  follows :  Sub¬ 
normal  production,  abnormal  prices,  and  -subnormal 
consumption. 

In  short  the  farmer  would  not  be  benefited  in  the  least. 
Even  though  curtailed  production  might  bring  him  higher 
prices  per  ton,  bushel,  or  pound,  the  higher  prices  would 
not  bring  him  a  bigger  amount  of  money  in  the  aggregate. 
Lessened  farm  production  with  resultant  higher  prices  for 
a  smaller  unit  of  production,  does  not  and  cannot  increase 
the  farmers  ’  quantity  of  money  income,  for,  those  who  must 
buy  would  meet  the  situation  by  cutting  down  their  pur¬ 
chases  probably  even  beyond  the  smaller  supply  produced. 
It  is  unbelievable  that  a  man  of  Secretary  Wallace’s  intelli¬ 
gence  should  seriously  propose  to  the  farmers  of  the  United 
States  so  disastrous  and  vicious,  an  economic  ‘  ‘  remedy.  ’  ’ 4 

“Exchange  Value ”  Once  More 

But  even  though  the  farmer,  by  producing  less  and  charg¬ 
ing  higher  prices  for  the  smaller  quantity  produced,  could 
increase  his  quantity  income,  his  economic  condition  would 
still  in  no  wise  be  improved,  for  the  exchange  value  of  his 
money,  its  purchasing  power,  would  be  no  greater.  Even 
though  it  were  possible  to  keep  up  the  higher  war  prices 
for  farm  products  the  farmer  would  still  be  no  better  off, 

4  In  his  letter  to  W.  E.  Holler,  of  the  Flint,  Mich.,  Chamber  of 
Commerce,  Secretary  Wallace  wrote :  “Kill  off  the  fallacy  that  it 
is  immoral  for  farmers  to  adjust  their  production  to  the  probable 
demand  by  curtailing-  a  particular  crop  in  the  face  of  a  present  or 
prospective  over  supply  and  ruinously  low  prices — a  thing  manu¬ 
facturers  have  been  doing-  from  the  beginning-  of  time.” — Quoted  from 
The  Chicago  Herald-Examiner ,  June  23,  1921. 


Where  Will  the  Farmer  Stand?  457 


for  the  high  prices  he  receives  for  what  he  sells  would  be 
absorbed  by  the  high  prices  he  would  be  compelled  to  pay 
for  what  he  must  buy.  The  high  prices  he  receives  for 
what  he  produces  are  reduced  to  nullity  by  the  high  prices 
he  must  give  for  what  others  produce. 

The  process  of  exchanging  high  priced  agricultural  prod¬ 
ucts  for  high  priced  industrial  products  is  essentially  a  can¬ 
cellation  process.  No  benefit  whatever  accrues,  either  to 
the  agricultural  producer  or  to  the  industrial  producer  (i.  e. 
wage  earner).  And  when  I  use  the  word  producer  here  it 
is  in  its  literal  sense,  for  the  average  farmer  is  a  wage 
earner,  before  he  is  an  investor.  Without  his  labor  his  in¬ 
vestment  is  dead.  He  cannot  go  to  Europe  for  a  year  or 
two  or  three  years  and  expect  to  derive  benefits  from  his 
property  unless  he  is  a  large  landowner,  and  has  his  busi¬ 
ness  so  thoroughly  systematized  that  his  personal  labor  or 
supervision  is  not  necessary  to  its  continued  success.  There 
are  some  such  in  the  United  States,  but  their  percentage  of 
the  total  is  negligible.  In  the  majority  of  cases  the  agri¬ 
cultural  proprietor  must  give  his  personal  supervision  and 
labor. 

Which  being  the  case  he  must,  for  all  practical  economic 
purposes,  consider  himself  classed  with  the  wage  earners, 
rather  than  with  the  Capitalistic  group.  It  is  from  non¬ 
investors  (wage  earners)  rather  than  from  investors  (Capi¬ 
talists)  that  the  farmer  derives  his  livelihood  and  his  profits. 
It  is  from  the  continued  patronage  of  the  non-investors 
(wage  earners)  that  the  farmer  will  hereafter,  as  in  the 
past,  derive  his  greatest  benefit.  Indeed  the  welfare  and 
prosperity  of  the  industrial  wage  earners  and  the  welfare 
and  prosperity  of  the  agricultural  wage  earners  are  of  a 
piece.  They  cannot  be  separated  without  injury  to  both 
parties. 

The  Solitary  Solution 

Prices  for  farm  products  have  seriously  slumped,  as  far 
as  the  producer  (the  farmer)  is  concerned,  but  the  slump 
has  brought  no  relief  to  the  consumer  (the  wage  earner), 


458 


The  New  Capitalism 


who  is  compelled  to  pay  in  the  course  of  his  retail  purchases 
of  them,  fluctuating  prices  whose  average  through  the  year 
at  least  approximates  the  prices  he  paid  for  them  in  1920, 
for  be  it  remembered  that  the  aggregate  living  costs  of  the 
average  wage  earner ’s  family,  which  includes  the  item  rent, 
are  practically  what  they  were  when  living  costs  were  at 
their  peak. 

There  is  but  one  hope  for  both  farmer  and  wage  earner, 
and  that  is  not  in  higher  prices  or  higher  wages,  but  in  a 
greater  exchange  value  of  the  wages  of  the  industrial  work¬ 
ers  and  a  greater  purchasing  power  of  the  prices  which  are 
the  wages  of  the  agricultural  worker.  The  power  to  restore 
the  dollar  to  its  maximum  value  lies  in  the  hands  of  the 
wage  earners  and  farmers. 

The  farmer  must  take  his  stand — either  he  must  array 
himself  on  the  Capitalistic  side  against  the  wage  earning 
non-investors;  or  he  must  take  his  stand  ivith  the  wage 
earning  non-investors,  against  the  encroachments  of  the 
Capitalistic  group,  thus  saving  not  only  the  wage  earner 
but  himself,  from  complete  submergence. 

It  should  not  be  difficult  for  the  farmer  to  decide.  For  all 
these  years  he  has  been  at  the  mercy  of  the  Capitalistic 
group.  Has  the  Capitalistic  group  ever  considered  the  far¬ 
mer's  welfare?  Let  each  farmer  answer  the  question  for 
himself.  Is  it  reasonable  to  suppose  that  the  Capitalistic 
group,  whose  whole  endeavor  is  to  pile  up  greater  and 
greater  Capital  accumulations,  and  to  concentrate  the  na¬ 
tional  wealth  within  the  hands  of  a  few, — will  hereafter 
extend  greater  consideration  to  the  agricultural  producers 
than  it  has  to  the  industrial  wage-earners? 

The  One  Hope 

Driven  to  desperation,  and  in  sheer  self  defense,  the  far¬ 
mers  are  organizing  themselves  into  national  associations. 
Will  they  be  successful?  Frankly,  I  doubt  it,  principally 
for  the  reason  that  in  one  vital  thing  they  are,  and  will  con¬ 
tinue  to  be,  dependent  upon  the  organized  Capitalistic 
group.  As  long  as  they  must  rely  upon  the  Capitalistic 


Where  Will  the  Farmer  Stand*?  459 


group  for  financial  assistance  to  enable  them  to  pay  their 
mortgages,  or  move  their  crops,  so  long  will  they  be  weak 
and  vulnerable — their  Achilles  heel  remain  exposed.  Under 
my  system,  in  due  time,  this  dependence  upon  Capitalistic 
assistance,  and  which  is  never  extended,  and  even  refused 
unless  a  sightly  profit  is  in  sight,  will  be  removed,  and  our 
cooperation  substituted  to  safeguard  the  farmers,  and  serve 
their  best  interests. 

I  can  only  hope  that  the  various  national  associations  of 
agricultural  producers  will  be  in  existence  and  in  perfect 
working  order  when  we  begin  to  operate,  for  it  will  be  alto¬ 
gether  simpler  for  us  to  cooperate  with  the  farmers  organ¬ 
ized  than  with  them  disorganized.  We  can  be  of  greater 
service  to  them  if  they  are  a  component,  homogeneous, 
united  group  than  divided  into  smaller  units — heterogene¬ 
ous,  scattered  and  ineffective.  We  may  not  be  able  in  the 
beginning  to  help  the  farmer  so  much  with  what  he  buys  as 
with  what  he  has  to  sell.  We  can  be  instrumental  in  pre¬ 
venting  the  profits  of  his  production  from  falling  into  the 
hands  of  the  non-farm  owning,  non-farm  working  Capitalis¬ 
tic  group.  More  than  that,  under  our  regime,  every  dollar 
of  money  he  receives,  will  have  a  vastly  increased  exchange 
value;  and  every  dollar  of  profit  a  considerably  higher 
purchasing  power. 


CHAPTER  XXXIII 
No  Political  Party 


I  EARNESTLY  beseech  those  into  whose  hands  the  man¬ 
agement  of  the  affairs,  and  the  control  of  the  destinies 
of  the  New  Order  will  be  committed,  to  make  no  at¬ 
tempt,  and  permit  no  attempt  to  be  made,  to  organize  the 
New  Order  into  a  political  party.  The  manifold  reasons 
for  the  undesirability  of  giving  a  political  character  and 
complexion  to  our  organization  are  so  obvious  that  I  hesi¬ 
tate  to  enumerate  them.  Still  there  may  be  some  who  hav¬ 
ing  insufficiently  considered  the  importance  and  magnitude 
of  the  project  advocated  in  this  book,  may  not  clearly  com¬ 
prehend  my  caution  and  counsel.  For  the  benefit  of  these 
I  will  briefly  summarize  my  reasons  and  arguments. 

Business  in  Politics 

In  the  first  place  let  us  remember  that  those  constituting 
the  Mammonistic-Capitalistic  Entrepreneur  group  are  not 
organized  into  a  political  party,  yet  they  thoroughly  con¬ 
trol  the  politics  of  the  nation,  dictating  the  platforms  and 
policies  of  both  of  the  major  parties — not  only  of  the  vari¬ 
ous  states  but  of  the  national  government  as  well.  It  is 
unnecessary  to  enter  upon  a  lengthy  discussion  of  this 
phase  of  my  subject.  The  conclusive  facts  are  recorded  in 
thousands  of  pages  of  official  investigations  and  reports. 
Moreover,  not  so  many  years  ago,  our  popular  magazines 
engaged  in  a  campaign  of  exposure  which  clearly  established 
the  premises  here  stated.  To  fill  pages  and  pages  of  this 
book  with  excerpts  and  quotations  would  be  like  writing 
a  voluminous  treatise  to  prove  that  water  is  wet. 

Nevertheless  to  clear  myself  of  any  charge'  of  misrepre¬ 
sentation  or  exaggeration  I  will  quote  the  first  official  utter¬ 
ance  on  the  subject  made  by  President  Cleveland  in  his 


460 


No  Political  Party 


461 


Fourth  Annual  Message  to  the  Congress  of  the  United  States 
(December  3,  1888)  : 

“We  discover  that  the  fortunes  realized  by  our  manufac¬ 
turers  are  no  longer  solely  the  reward  of  sturdy  industry 
and  enlightened  foresight,  but  that  they  result  from  the  dis¬ 
criminating  favor  of  the  Government  and  are  largely  built 
upon  undue  exactions  from  the  masses  of  our  people.  The 
gulf  between  employers  and  the  employed  is  constantly 
widening,  and  classes  are  rapidly  forming,  one  comprising 
the  very  rich  and  powerful,  while  in  another  are  found  the 
the  toiling  poor. 

“As  we  view  the  achievement  of  aggregated  capital  we 
discover  the  existence  of  trusts,  combinations,  and  monopo¬ 
lies,  while  the  citizen  is  struggling  far  in  the  rear  or  is 
trampled  to  death  beneath  an  iron  heel.  Corporations, 
which  should  be  the  carefully  restrained  creatures  of  the 
law  and  the  servants  of  the  people,  are  fast  becoming  the 
people ’s  masters.  ’ ’  1 

“Big  Business ”  Statesmen 

Succeeding  Presidents  in  their  addresses  or  messages  to 
Congress  expressed  similar  sentiments  with  regard  to  the 
growing  menace  of  Trusts,  Combines  and  Monopolies.  But 
after  the  organization  of  the  United  States  Steel  Corpora¬ 
tion  we  discern  a  less  critical  attitude;  in  fact,  a  decided 
change  of  front  became  distinctly  observable  in  some  of  the 
official  utterances.  Accusations  and  condemnations  are 
transmuted  into  palliation  of  deeds,  and  admiration  for 
and  laudation  of,  the  doers.  Thus  in  his  first  Message  to 
Congress  (December  3,  1901),  President  Roosevelt  said: 

“The  captains  of  industry  who  have  driven  the  railway 
systems  across  this  continent,  who  have  built  up  our  com¬ 
merce,  who  have  developed  our  manufactures,  have  on  the 
whole  done  great  good  to  our  people.  Without  them  the 
material  development  of  which  we  are  so  justly  proud  could 
never  have  taken  place.  Moreover,  we  should  recognize  the 
immense  importance  of  this  material  development  of  leaving 


i  Messages  and  Papers  of  the  Presidents,  Vol.  VIII,  p.  774. 


462 


The  New  Capitalism 


as  unhampered  as  is  compatible  with  the  public  good  the 
strong  and  forceful  men  upon  whom  the  success  of  business 
operations  inevitably  rests.  The  slightest  study  of  business 
conditions  will  satisfy  anyone  capable  of  forming  a  judg¬ 
ment  that  the  personal  equation  is  the  most  important  factor 
in  a  business  operation ;  that  the  business  ability  of  the  man 
at  the  head  of  any  business  concern,  big  or  little,  is  usually 
the  factor  which  fixes  the  gulf  between  striking  success  and 
hopeless  failure.  .  .  . 

“The  mechanism  of  modern  business  is  so  delicate  that 
extreme  care  must  be  taken  not  to  interfere  with  it  in  a 
spirit  of  rashness  or  ignorance.  Many  of  those  who  have 
made  it  their  vocation  to  denounce  the  great  industrial  com¬ 
binations  which  are  popularly,  although  with  technical  in¬ 
accuracy,  known  as  “trusts,”  appeal  especially  to  hatred 
and  fear.  These  are  precisely  the  two  emotions,  particularly 
when  combined  with  ignorance,  which  unfit  men  for  the 
exercise  of  cool  and  steady  judgment.  In  facing  new  indus¬ 
trial  conditions,  the  whole  history  of  the  world  shows  that 
legislation  will  generally  be  both  unwise  and  ineffective  un¬ 
less  undertaken  after  calm  inquiry  and  with  sober  self 
restraint.  Much  of  the  legislation  directed  at  the  trusts 
would  have  been  exceedingly  mischievous  had  it  not  also 
been  entirely  ineffective.  .  .  . 

“There  is  widespread  conviction  in  the  minds  of  the 
American  people  that  the  great  corporations  known  as  trusts 
are  in  certain  of  their  features  and  tendencies  hurtful  to 
the  general  welfare.  This  springs  from  no  spirit  of  envy 
or  uncharitableness,  nor  lack  of  pride  in  the  great  industrial 
achievements  that  have  placed  this  country  at  the  head  of 
the  nations  struggling  for  commercial  supremacy.  It  does 
not  rest  upon  a  lack  of  intelligent  appreciation  of  the  neces¬ 
sity  of  meeting  changing  and  changed  conditions  of  trade 
with  new  methods,  nor  upon  ignorance  of  the  fact  that  com¬ 
binations  of  capital  in  the  effort  to  accomplish  great  things 
is  necessary  when  the  world’s  progress  demands  that  great 
things  be  done.  It  is  based  upon  sincere  conviction  that 
combination  and  concentration  should  be,  not  prohibited, 


No  Political  Party 


463 


but  supervised  and  within  reasonable  limits  controlled ;  and 
in  my  judgment  this  conviction  is  right.  ’  ’ 2 

One  is  not  surprised,  therefore,  that  in  1907  the  President 
of  the  United  States  abetted  the  United  States  Steel  Cor¬ 
poration  in  the  absorption  of  the  Tennessee  Coal  and  Iron 
Company,  the  acquisition  of  which  was  “particularly  ad¬ 
vantageous  to  the  Steel  Corporation,  because  of  the  iron 
and  coal  properties  that  go  with  it.”  (Investigation  of  the 
United  States  Steel  Corporation  Hearings,  p.  1129.)  3 

Statesmen  on  “ Big  Business”  in  Politics 

That  conditions  had  not  materially  altered — except  for 
the  worse — since  President  Cleveland’s  declaration  of  1888 
may  be  judged  from  the  following  from  Woodrow  Wilson’s 
book,  “The  New  Freedom,”  published  in  1913: 

‘  ‘  One  of  the  most  alarming  phenomena  of  the  time,  .  .  . 
is  the  degree  to  which  government  has  become  associated 
with  business.  I  speak  for  the  moment  of  the  control  over 
the  Government  exercised  by  Big  Business.  Behind  the 
whole  subject,  of  course,  is  the  truth  that,  in  the  new  order, 
government  and  business  must  be  associated  closely.  But 
that  association  is  at  present  of  a  nature  absolutely  intoler¬ 
able;  the  precedence  is  wrong,  the  association  is  upside 
down.  Our  Government  has  been  for  the  past  few  years 
under  the  control  of  heads  of  great  allied  corporations  with 
special  interests.  It  has  not  controlled  these  interests  and 
assigned  them  a  proper  place  in  the  whole  system  of  busi¬ 
ness;  it  has  submitted  itself  to  their  control.  As  a  result 
there  have  grown  up  vicious  systems  and  schemes  of  govern¬ 
mental  favoritism  (the  most  obvious  being  the  extravagant 
tariff)  far-reaching  in  effect  upon  the  whole  fabric  of  life, 
touching,  to  his  injury,  every  inhabitant  of  the  land,  laying 
unfair  and  impossible  hardships  upon  competitors,  imposing 
taxes  in  every  direction,  stifling  everywhere  the  free  spirit 
of  American  enterprise.  .  .  .  It  is  an  intolerable  thing 

2  Messages  and  Papers  of  the  Presidents,  Vol.  X,  pp.  422,  423,  424. 

3  Senator  La  Follette  is  authority  for  the  statement  that  over 
twelve  thousand  firms  were  combined  during  the  seven  years  of 
President  Roosevelt’s  administration. 


464 


The  New  Capitalism 


that  the  Government  of  the  republic  should  have  got  so  far 
out  of  the  hands  of  the  people ;  should  have  been  captured 
by  interests  which  are  special  and  not  general.  In  the  train 
of  this  capture  follow  the  troups  of  scandals,  wrongs  and 
indecencies,  with  which  our  politics  swarm  .  .  . 

“We  know  that  something  intervenes  between  the  people 
of  the  United  States  and  the  control  of  their  own  affairs  at 
Washington.  It  is  not  the  people  who  have  been  ruling 
them  of  late,”  etc.,  etc. 

More  Recent  Testimony 

On  April  16,  1921,  Senator  La  Follette  delivered  an  ad¬ 
dress  in  Washington,  D.  C.,  under  the  auspices  of  the  Na¬ 
tional  Council  of  the  People’s  Legislative  Service,  from 
which  I  quote  the  following : 

“The  great  issue  before  the  American  people  today  is 
the  control  of  their  own  government. 

“A  mighty  power  has  been  builded  in  this  country  in 
recent  years,  so  strong,  yet  so  insidious  and  far-reaching 
in  its  influence  that  men  are  gravely  inquiring  whether  its 
iron  grip  on  government  and  business  can  ever  be  broken. 

“Again  and  again  it  has  proved  strong  enough  to  nomi¬ 
nate  the  candidates  for  both  political  parties.  It  has  domi¬ 
nated  the  organization  of  legislative  bodies,  state  and  na¬ 
tional,  and  of  the  committees  which  frame  legislation.  Its 
influence  has  been  felt  in  cabinets  and  in  the  policies  of  ad¬ 
ministrations  and  has  been  clearly  seen  in  the  appointment 
of  prosecuting  officers  and  the  selection  of  judges  upon  the 
bench.  In  business  it  has  crippled  or  destroyed  competi¬ 
tion.  It  fixes  the  prices  of  the  necessaries  of  life  and  im¬ 
poses  its  burdens  upon  the  consuming  public  in  defiance  of 
the  law.  In  transportation,  after  a  prolonged  struggle  for 
government  control,  it  is  absolute  master  of  the  highways 
of  commerce.  In  finance  its  power  is  unlimited.  With  the 
connivance  of  the  trustees  of  the  people,  it  has  acquired  vast 
areas  of  the  public  domain  and  has  monopolized  the  natural 
resources — timber,  iron,  coal,  oil.  And  this  thing  has  grown 


No  Political  Party 


465 


up  in  a  country  where,  under  the  Constitution  and  the  law, 
the  CITIZEN  is  sovereign. 

“This  great  power  which  has  taken  from  the  American 
people  the  control  of  their  own  government,  is  the  product 
of  Monopoly  and  Organized  Greed. 

‘  ‘  At  this  hour,  as  never  before  in  the  history  of  this  coun¬ 
try,  the  Congress  of  the  United  States  is  being  subjected  to 
influences  which  are  undermining  representative  govern¬ 
ment. 

“Never  before,  in  a  generation  of  time,  has  the  national 
capital  attracted  so  menacing  an  army  of  lobbyists  seeking 
from  the  representatives  of  the  people  unjust  concessions 
to  special  interests,  ”  etc. 

Plain  Words 

Scores  of  other  statesmen  are  on  record  with  definite  and 
specific  charges,  accusing  the  Capitalistic  group  of  consti¬ 
tuting  an  “invisible  government.”  But  to  establish  a  fact 
already  known  is  not  the  purpose  of  this  chapter.  Let  me, 
therefore,  continue  with  the  more  practical  considerations 
involved  in  my  counsel  not  to  venture  upon  any  attempt  to 
organize  a  political  party  under  the  auspices  of  the  New 
Order — at  least  not  for  many  years  to  come. 

The  first  requisite  for  a  successful  party  is  a  powerful 
national  press.  While  the  New  Order  will  endeavor  to  build 
up  a  national  press,  years  necessarily  must  elapse  before  one 
sufficiently  strong  to  cope  with  all  the  established  Capital¬ 
istically  owned  and  controlled  periodicals  can  be  developed. 
The  foolhardiness  of  launching  a  party  without  a  press  must 
be  apparent  to  all. 

Moreover,  we  would  for  many  years  be  a  third  and  a 
minority  party,  and  in  competition  with  the  existing  major 
parties,  which  would  place  us  beyond  the  pale  of  their 
consideration.  Without  a  party  of  our  own,  we  can  claim 
the  attention  of  both  parties.  Both  parties  will  court  our 
favor  and  covet  our  assistance ;  and  so  be  careful  not  to  an¬ 
tagonize  or  offend  us.  Thus  we  would  exercise  a  greater 


466 


The  New  Capitalism 


influence  and  power  than  if  we  were  entirely  detached  from 
and  opposed  to  them. 

But  even  though  it  were  possible,  after  a  score  or  so  of 
years,  to  win  in  a  state  or  national  election,  we  would  expose 
ourselves  to  possible  defeat  in  some  following  election,  just  as 
one  or  the  other  of  the  existing  major  parties  regularly  suf¬ 
fers  defeat  at  present.  The  inevitable  result  would  be  that 
before  long  we  would  find  ourselves,  in  order  to  combat  the 
chicanery  and  trickery  of  politicians,  put  to  the  necessity 
of  giving  a  larger  measure  of  attention  to  politics  than  to 
economics,  thus  inviting  both  political  and  economic  dis¬ 
aster. 

When  the  Tail  Wags  the  Dog 

Political  economists  are  prone  to  accentuate  that  the  po¬ 
litical  and  economic  life  of  a  nation  are  inextricably  inter¬ 
woven;  that  politics  and  economics  are  inseparably  linked 
together.  And  there  is  a  measure  of  truth  in  their  contention. 
That  is  why  in  European  countries  fiery  doctrinaires  are 
preaching  that  their  economic  emancipation  and  their  politi¬ 
cal  liberation  can  be  brought  about  only  by  the  overthrow 
of  the  existing  governments. 

‘  ‘  Socialism,  ’  ’  said  Lenin,  *  ‘  is  impossible  without  the  domi¬ 
nation  of  the  proletariat  in  the  state.  ’  ’  In  other  words,  the 
proletariat,  according  to  Lenin’s  philosophy,  is  to  be  the 
state.  This  is  in  no  wise  different  from  the  famous  saying 
of  Louis  XIV — L’Etat,  c’est  mois — “I  am  the  State.” 

In  Europe  there  may  be  reason  and  justification  for  the 
several  attempts  that  have  been,  and  are  being  made,  to 
ameliorate  economic  conditions  by  radical  political  changes ; 
but  not  in  the  United  States.  And  I  seize  this  opportunity 
to  note  the  distinctive  difference  between  my  plan  and  the 
sundry  politico-economic  isms  with  which  the  public  is  more 
or  less  familiar.  I  place  myself  in  uncompromising  opposi¬ 
tion  to  those  who  declare  that  the  economic  redemption  of 
society  can  be  accomplished  only  through  the  instrumental¬ 
ity  of  the  State.  I  hold  that  an  economic  system  that  de¬ 
pends  for  its  maintenance  upon  the  exercise  of  political 


No  Political  Party 


467 


power,  or  that  has  for  its  basic  principle  the  destruction  of 
wealth,  the  elimination  of  capital,  and  the  confiscation  of 
property  regardless  of  the  established  processes  of  law ;  or 
the  dispossession  of  a  group,  because  a  few,  or  even  many, 
within  that  group  have  wrongfully  acquired  property  or 
wealth,  cannot  be  approved.  Any  economic  program  that 
calls  for  the  violent  overthrow  of  the  existing  political  order, 
whether  that  order  is  acceptable  or  not,  is,  to  say  the  least, 
a  dangerous  doctrine.  Nor  have  I  any  sympathy  with  any 
economic  scheme  that  is  synonymous  with  a  leveling  process. 
All  radical  reform  plans  and  their  derivatives,  by  whatever 
name  they  may  be  called,  I  sweep  aside,  not  so  much  because 
they  are  revolutionary  but  because  they  would  not  change 
for  the  better — but  rather  for  the  worse,  the  conditions 
against  which  the  world  is  in  protest.  Granting  that  the 
present  Capitalistic  order  of  society  is  tyrannical  and  un¬ 
just,  the  substitution  of  any  of  the  radical  isms  would  still 
continue  that  tyranny  and  injustice.  Its  acceptance  would 
merely  transfer  tyrannical  control  and  power  from  the 
hands  of  the  Capitalistic  group  to  the  hands  of  a  none  the 
less  tyrannical*  group — call  it  proletariat  or  by  whatever 
name  you  choose. 

The  Power  of  the  Ballot 

Happily  we  in  the  United  States  are  more  fortunately 
situated  than  the  people  of  Europe.  Though  tremendous 
changes  have  taken  place  in  our  country ’s  political  principles 
and  policies  during  the  past  few  decades — changes  which 
perverted  our  government  from  a  Democracy  into  a  Timoc¬ 
racy — while  many  public  officials  have  proved  unfaithful 
to  their  trust  and  betrayed  the  people,  there  reposes  in  our 
hands  the  franchise  through  the  intelligent  exercise  of  which 
every  existing  evil  can  be  removed  or  eradicated.  4 

I  hold  that  fundamentally  our  political  life  and  our  eco¬ 
nomic  life  are  distinct;  certainly  they  are  not  irremediably 

4  De  T-ocqueville,  author  of  “Democracy  in  America,”  in  one 
of  his  letters  said :  “All  the  world  over.  Governments  are  just  as 
rascally  as  nations  will  allow  them  to  be.  This  is  the  only  limit 
to  their  vices.” 


468 


The  New  Capitalism 


interwoven  as  they  seem  to  be  in  the  European  countries. 
Speaking  with  particular  reference  to  the  United  States — 
I  am  inclined  to  think  that  the  Capitalistic  economists  have 
hitherto  put  an  undue  stress  on  the  Political  features  of  the 
“science”  of  Political  Economy.  We  propose  to  put  the 
greater  stress  on  the  Economy  side.  Instead  of  worrying  over 
the  porisms  of  Political  Economy,  we  will  build  up  a  science 
of  Economic  Politics — or  rather  let  me  call  it — Economic 
Polity.  A  century  and  a  half  of  experience  has  revealed 
that  the  people  cannot  hope  to  improve  their  economic  con¬ 
dition  through  the  medium  of  politics.  Perhaps  it  will  be 
easier  for  them  to  improve  politics  by  first  improving  their 
economic  condition.  A  people  that  is  held  in  economic  sub¬ 
jection  cannot  be  politically  powerful,  however  much  writ¬ 
ers  and  speakers  may  disguise  the  fact  by  mouthing  the 
word  ‘  ‘  Democracy  ’ J  and  its  variants.  As  long  as  the  people 
are  economically  enslaved,  so  long  will  they  be  held  in 
political  bondage ;  and  all  the  oratorical  boast  about  ‘  ‘  popu¬ 
lar  government”  and  “government  of  the  people,  for  the 
people  and  by  the  people”  are  but  words,  words,  words — 
meaningless  phrases  and  inept  platitudes.  Not  until  they 
are  economically  powerful  can  the  people  become  politically 
potent. 

At  any  rate — let  it  never  be  forgotten  that  the  New  Order 
is  primarily  an  Economic  Association,  organized  for  the 
definite  purpose  of  bringing  about  the  economic  welfare 
and  security  of  the  people.  If  we  are  true  to  our  prin¬ 
ciples  the  New  Order  can  get  along  without  any  political 
party;  the  New  Capitalism  can  succeed  independently  of 
politics. 

“A  Daniel  Come  to  Judgment ” 

At  the  Annual  Meeting  of  Stockholders  5  of  the  United 
States  Steel  Corporation  (April  18,  1921)  Mr.  Elbert  H. 
Gary  read  a  paper  entitled  “Principles  and  Policies  of  the 

5  It  would  be  interesting  to  know  how  many  of  the  160,000  stock¬ 
holders  of  the  United  States  Steel  Corporation  attended  the  meet¬ 
ing  ;  and  their  names  and  addresses ;  and  the  amount  of  the  actual 
holdings  of  each  would  add  to  the  interest. 


469 


No  Political  Party 

United  States  Steel  Corporation.”  I  have  no  intention  of 
analyzing  these  “Principles  and  Policies”  at  this  time;  nor 
even  of  discussing  Mr.  Gary's  utterances,  beyond  saying 
that,  of  course,  he  reiterated  his  avowed  opposition  to  labor 
unions.  “I  firmly  believe  that  complete  unionization  of  the 
industry  of  this  country  .  .  .  would  be  the  beginning 

of  industrial  decay,”  said  Mr.  Gary. 

Let  that  pass  without  comment.  I  am  not  interested  in 
that  aspect  of  the  controversy  at  this  time.  It  is  only  the 
last  sentence  of  Mr.  Gary ’s  discussion  of  ‘  ‘  labor  unions  ’  ’  on 
which  I  shall  concentrate  for  a  moment.  Says  Mr.  Gary  : 

“It  seems  to  me  that  the  natural,  if  not  the  necessary, 
result  of  the  contemplated  program  of  labor  unions,  if  suc¬ 
cessful,  would  be  to  secure  the  control  of  the  shops,  then 
of  the  general  management  of  business,  then  of  capital,  and 
finally  of  government.” 

Mr.  Gary’s  fears  are  well  founded,  but  he  has  the  cart 
before  the  horse.  He  has  somewhat  mixed  the  order  of 
procedure.  Under  the  New  Capitalism,  the  people,  with 
organized  labor,  as  the  nucleus  will  endeavor  first  to  secure 
control  of  capital — their  own  capital,  if  you  please — the 
very  capital  which  Mr.  Gary  and  the  entire  tribe  of  Capi¬ 
talistic  Entrepreneurs  are  today  using  in  a  high-handed 
fashion,  and  have  ruthlessly  utilized  for  all  these  years; 
and  by  the  unchallenged  use  of  which  he  and  his  friends 
and  associates  have  grown  fabulously  wealthy;  besides  ac¬ 
quiring  an  uncontrolled  power  which  he  and  his  kith  are  now 
employing  to  suppress  and  enslave  those  who  labor  for  a 
wage. 

No,  Mr.  Gary,  you  are  in  error;  the  “contemplated  pro¬ 
gram  of  labor  unions”  under  the  rule  of  the  New  Capital¬ 
ism,  does  not  contemplate  “to  secure  the  control  of  shops 
and  management  of  business  ’  ’  until  it  has  taken  away  from 
you  and  your  kith  the  ruthless  control  of  capital  and  all 
that  this  implies.  Your  fear  that  the  labor  unions  will 
finally  secure  control  of  government  need  not  disturb  you 
for  a  while  as  yet,  for  as  the  author  of  the  New  Capitalism 
I  distinctly  warn  against  political  maneuvers.  But  since 


470 


The  New  Capitalism 


I  am  on  this  subject;  since  you  yourself  raise  the  point, 
what  possible  objection  can  you  offer  against  any  group, 
truly  solicitious  for  the  people’s  welfare,  I  will  not  say  try¬ 
ing  to  secure  1 1  control  of  government,  ’  ’  but  endeavoring  to 
take  the  control  of  government  away  from  you  and  your 
Capitalistic  associates?  Or  do  you  really  believe  that  the 
average  citizen  is  so  densely  ignorant  as  not  to  know  that 
Big  Business — the  corporations,  the  Capitalistic  Entrepre¬ 
neurs — the  Mammonistic  Capitalists — absolutely  control 
the  politics  of  the  nation  ? 

The  End  of  Timocracy 

I  have  already  quoted  Aristotle  to  the  effect  that  there 
are  three  political  constitutions:  Kingship  (or  monarchy), 
aristocracy,  and  timocracy.  “Of  these,”  says  Aristotle, 
“timocracy  is  the  worst,”  because  it  is  the  rule  of  wealth. 
“From  timocracy,”  continues  Aristotle,  “the  transition  is 
to  Democracy .” 

Timocracy  in  the  United  States  cannot  maintain  itself 
except  by  the  potency  of  party  rule ;  and  party  rule  is  wan¬ 
ing  fast.  At  any  rate  the  transition  from  Timocracy  to 
Democracy  will  not  be  brought  about  by  any  of  the  existing 
political  parties  (in  whose  vapid  platform  promises  the 
people  have  lost  all  confidence),  but  by  the  people  them¬ 
selves  who,  in  the  years  to  come,  will  choose  their  own  can¬ 
didates,  and  give  their  support  to  men  and  principles  rather 
than  to  selfish  Capitalitic  measures,  disguised  as  partisan 
programs. 

It  is  this  belief  that  persuades  me  to  say  that  there  may, 
— indeed  I  think  there  will — come  a  time  when  a  political 
organization  truly  representative  of  the  eighty  (and  more) 
million  non-investors  will  be  formed,  but  not  in  the  usual 
way.  Ordinarily  a  few  irrelevant  platitudes  formulated 
into  a  ringing  platfrom,  a  picturesque  or  dazzling  leader 
and  a  striking  party  name,  were  considered  sufficient  to 
arouse  popular  sentiment  and  win  for  it  the  support  of  the 
people. 

The  New  Order  must  operate  along  different  lines.  It 


No  Political  Party 


471 


must  first  of  all  demonstrate  its  fitness,  and  prove  that  its 
principles  are  safe  and  sound,  and  its  leaders  worthy  of  an 
increase  of  trust.  These  things  conclusively  proved  through 
a  series  of  years,  the  spontaneous  sentiment  of  the  voters 
among  the  eighty  (and  more)  million  will  shape  itself  into 
a  majority  which  in  due  time  will  insist  on  expressing  itself 
as  a  unit  at  the  polls. 

In  the  meantime  from  the  eighty  (and  more)  million  will 
come  the  legislators  and  judges  and  the  officials  of  federal, 
state  and  city  governments,  and  who  will  carry  into  their 
public  service  the  conviction  that  the  interests  of  the  eighty 
(and  more)  million  are  at  least  as  important  as  the  interests 
of  the  twenty  million. 

It  will  be  years  before  this  metamorphosis  can  take  place, 
but  in  the  New  Order  it  will  surely  come  to  pass.  Without 
any  effort  or  design  this  party  will  slowly  shape  itself,  and 
all  that  will  be  needed  to  give  it  entity,  is  a  name. 


CHAPTER  XXXIV 
The  Concluding  Chapter 


WE  have  been  told  of  the  Englishman  who,  while 
confined  in  the  Debtors’  Prison,  wrote  a  treatise  on 
how  to  wipe  out  the  national  debt  of  England; 
whereat  we  are  supposed  to  laugh.  But  we  have  never  been 
told  what  his  plan  was ;  therefore  none  can  tell  whether  it 
was  meritorious  or  otherwise.  Nor  is  there  anyone  who  can 
deny  that  if  his  plan  had  been  tried  the  national  debt  of 
England  might  have  been  liquidated.  Nor  can  anyone  as¬ 
sert  that  said  debtor  was  more  foolish  than  the  government 
that  put  him  behind  the  bars. 

It  is  entirely  within  the  realm  of  possibilities  for  one  sent 
to  prison  for  debt  to  devise  a  plan  that  might  bring  freedom 
from  debt  to  the  nation  that  sent  him  there.  Certainly  it  is 
not  more  incongruous  than  a  barber  inventing  the  spinning- 
wheel.  When  you  come  to  think  about  it,  nearly  all  great 
discoveries  and  inventions  were  made  by  most  unlikely  peo¬ 
ple — by  people  who  were  considered  failures,  or  fools,  or 
lacking  in  wit;  or  ne’er-do-wells,  or  dreamers —  Theorists , 
we  call  them  today.  Some  of  the  most  biting  sarcasm  I 
have  ever  heard,  fell  from  the  lips  of  speakers  before  Cham¬ 
bers  of  Commerce  crowds,  and  before  Economic  Associa¬ 
tions;  it  was  leveled  at  Theorists.  The  sarcastic  denuncia- 
tors  were,  or  at  least  considered  themselves,  practical  men. 
It  did  not  occur  to  them  that  they  were  of  the  lowest  order 
of  theorist — that  is,  parrot  theorists — setting  forth  the  theo¬ 
ries  of  others — expounding  doctrines  which  they  themselves 
lacked  the  intelligence  to  originate;  dicoursing  on  prin¬ 
ciples  which  others,  not  they,  had  the  ingenuity  to  discover. 

Theorists  and  Theories 

Now  as  a  matter  of  fact,  whatever  of  progress  has  been 
made  in  the  world,  or  whatever  development  with  regard 


472 


The  Concluding  Chapter 


473 


to  civilization,  it  is  the  result  of  theories.  The  American 
continent  was  discovered  because  Columbus  had  a  theory. 
When  Washington  and  Jefferson,  et  at;  founded  the  Ameri¬ 
can  Republic,  they  were  theorists, — not  practical  men !  They 
had  a  theory  of  government — which,  by  the  way,  is  still  in 
its  experimental  stages,  likely  within  the  next  decade  or  two 
to  prove  itself  a  success  or  a  failure.  As  long  as  we  ad¬ 
hered  to  the  principles  underlying  their  theory  our  country 
was  safe ;  but  now  that  we  ignore  their  principles,  and  are 
departing  from  their  theory,  the  country  is  in  danger;  in 
more  serious  danger  than  I  care  to  admit.  But  whatever 
our  Government  may  be  today ;  or  will  have  proved  itself  to 
be  ten  or  twenty  years  hence,  this  must  be  admitted — that 
the  American  Government,  when  first  proposed,  was  a 
theory ;  its  organization  and  development,  the  work  of  theo¬ 
rists. 

In  fact,  every  great  achievement  in  the  world  was  first 
proposed  as  a  theory!  Watt,  who  discovered  the  power  of 
steam,  was  a  theorist ;  Fulton,  who  applied  the  discovery  to 
navigation,  was  a  theorist;  Stephenson,  who  turned  it  to 
land  purposes,  was  a  theorist.  The  telephone,  the  telegraph, 
the  wireless,  the  aeroplane,  the  biograph,  the  automobile, 
the  radio,  radium — hundreds  of  other  inventions  and  dis¬ 
coveries,  were  but  the  fruition  of  theories.  Write  this  down 
in  your  notebook :  Theorists,  not  practical  men,  have 
pushed  the  world  onward  and  upward.  Theorists,  not  prac¬ 
tical  men,  are  the  hope  of  the  world  today. 

One  of  the  cleverest  things  that  Gilbert  K.  Chesterton  has 
ever  written  is  this :  ‘  ‘  There  has  arisen  in  our  time  a  most 
singular  fancy ;  the  fancy  that  when  things  go  very  wrong 
we  need  a  practical  man.  It  would  be  truer  to  say  that  when 
things  go  wrong  we  need  an  unpractical  man.  Certainly 
at  least  we  need  a  theorist.  A  practical  man  means  a  man 
accustomed  to  mere  daily  practice,  to  the  way  things  com¬ 
monly  work.  When  things  will  not  work  you  must  have  the 
thinker,  the  man  who  has  some  doctrine  why  they  work 
at  all.” 


474 


The  New  Capitalism 

The  Failure  of  Practical  Men 

There  is  a  world  of  truth  in  these  words.  If  you  want  to 
know  what  a  frightful  mess  practical  men  have  made  of 
human  affairs  everywhere,  you  need  but  look  about  you, 
or  read  your  daily  paper.  Who  is  responsible  for  the  eco¬ 
nomic,  and  other,  troubles  of  the  world  today  ?  Why,  prac¬ 
tical  men !  Who  is  responsible  for  the  world  muddle  ?  Again 
the  answer  is — practical  men!  Who  invented  the  various 
methods  and  sundry  systems  that  are  threatening  to  cul¬ 
minate  in  chaos?  The  answer  is  simple — practical  men! 
Who  is  aggravating  and  intensifying  the  universal  unrest  ? 
Practical  men !  Who  is  getting  the  world  deeper  and  deeper 
into  the  mire?  Echo  answers — practical  men!  The  ter¬ 
ribly  disturbed  conditions  in  the  United  States  and  else¬ 
where,  are  the  result  of  the  plannings,  scheming  and  plot¬ 
tings  of  practical  men !  Which  being  the  case,  from  prac¬ 
tical  men,  good  Lord,  deliver  us ! 

Therefore,  avaunt,  ye  practical  men!  Enter  the  theo¬ 
rist!  You  need  not  take  off  your  hat  to  the  theorist,  nor 
bend  your  knee  to  him;  but  at  least  do  not  pelt  him  with 
stones,  nor  stick  out  your  tongue  at  him.  The  theoretical 
man  adheres  to  the  fundamentals,  unswervingly,  uncom¬ 
promisingly.  In  his  reasoning  processes  he  hews  to  the  line 
and  lets  the  chips  fall  where  they  may.  He  neither  dissem¬ 
bles  ;  nor  deludes  himself ;  nor  deceives  his  fellow  man.  He 
speaks  the  truth,  as  he  sees  it ;  and  calls  things  by  their  right 
name.  Smash  his  principles  and  his  theories  fall  to  the 
ground.  But  ‘‘until  thou  canst  rail  the  seal”  from  off  his 
bond,  “thou  but  offend ’st  thy  lungs  to  speak  so  loud.” 

President  Wilson  went  into  the  Peace  Conference — an 
unpractical  man,  a  theoretical  man,  a  leader;  he  came  out 
of  it  a  practical  man,  a  compromiser,  a  defeated  man.  Had 
he  adhered  to  the  fundamentals — had  he  even  held  uncom¬ 
promisingly  to  his  enunciated  theories,  the  historian  a  hun¬ 
dred  years  hence  would  be  compelled  to  declare  him  one  of 
the  greatest  men,  perhaps  the  greatest  man,  of  all  times. 


The  Concluding  Chapter 


475 


False  Maxims 

A  modern  writer  has  said  that  the  world  is  governed  by 
a  half  hundred  maxims,  most  of  which  are  false.  This  is 
literally  true.  It  is  particularly  true  with  whatever  per¬ 
tains  to  economics.  The  whole  porismatic  “science”  of 
Political  Economy  is  constructed  around  maxims  most  of 
which  are  false.  These  false  maxims  have  been  current  so 
long  that  they  are  accepted  as  axioms.  Men  who  in  all  their 
lives  have  never  so  much  as  looked  at  the  outside  of  a  book 
on  Political  Economy, —  (and  who  wouldn’t  have  the  intelli¬ 
gence  to  understand  what  they  read  were  they  ever  to  ven¬ 
ture  upon  the  perusal  of  a  few  pages  of  such  a  book,  should 
it  accidentally  fall  into  their  hands) — mouth  them  as  if 
their  mere  utterance  constituted  the  finality  of  human 
wisdom.  Thus  I  have  heard  men  of  supposed  intelligence 
prate  of  the  “established  order”  as  if  it  were  a  sacred  and 
unchangeable  thing — entirely  ignoring  that  what  we  call  the 
“established”  order  today,  was  not  in  existence  a  half- 
century  ago.  Time  and  again  I  have  heard  the  statement 
“prices  are  regulated  by  the  gold  supply”  made  by  men 
who  could  not,  for  the  life  of  them,  tell  how  much  gold,  coin 
and  bullion,  there  is  in  the  United  States;  or  how  many 
grains  of  gold  are  contained  in  the  standard  gold  dollar. 
And  I  have  heard  men  who  were  both  ignorant  and  illiterate 
defend  the  excessive  price  of  their  particular  commodities 
by  the  ‘  ‘  law  of  supply  and  demand.  ’  ’  It  was  of  this  ‘  ‘  law  ’  ’ 
of  which  DeQuincey  wrote:  “A  crazy  maxim  has  got  pos¬ 
session  of  the  whole  world;  viz.,  that  price  is,  or  can  be, 
determined  by  the  relation  between  supply  and  demand.  ’  ’ 

Maxims  that  are  false;  half  truths;  perversions  of  the 
truth ;  and  plain  lies — these  are  things  with  which  the  world 
has  been  governed  for  many,  many  centuries.  “Go,  my 
son,”  said  a  Swedish  Chancellor  to  his  son,  “go  and  see 
with  what  little  cost  of  wisdom  this  world  is  governed.  ’  ’ 

“Where  Ignorance  is  Bliss” 

How,  then,  in  spite  of  the  falsity  of  the  maxims,  and  the 
remarkable  unwisdom  of  those  who  govern  us,  did  the  world 


476 


The  New  Capitalism 


manage  to  get  along  as  well  as  it  did  ?  The  answer  is  given 
by  the  cynic  who  said  that  five  percent  of  the  people  think ; 
tan  percent,  think  they  think ;  and  eighty-five  percent  would 
rather  die  than  think.  If  it  were  otherwise  it  would  not 
have  been  possible  for  a  few  thousand  (or  a  few  million,  if 
‘  ah  will)  to  gather  the  wealth  of  the  world  into  their  laps, 
leaving  to  the  many  millions  just  enough  sustenance  to  keep 
body  and  soul  together.  And  it  would  not  have  been  pos¬ 
sible  to  foist  upon  the  people  a  “ science”  which  pretends 
to  concern  itself  with  the  distribution  of  wealth,  when  in 
reality  it  concerns  itself  only  with  the  concentration  of 
wealth  in  the  hands  of  a  few,  and  the  exclusion  of  the  many 
millions  from  participation  therein. 

“Go,  my  son,”  said  a  Swedish  Chancellor  to  his  son, — 
“go  and  see  with  what  little  cost  of  wisdom  this  world  is 
governed.”  “Go,”  might  a  scholar,  in  like  manner  say, 
after  a  thoughtful  review  of  literature,  “go  and  see  how 
little  logic  is  required  to  the  composition  of  most  books.  ’  ’ 1 

The  One  Non-Progressive  Science 

DeQuincey,  writing  in  the  first  quarter  of  the  nineteenth 
century,  had  in  mind  those  books  on  Political  Economy 
written  toward  the  end  of  the  eighteenth  century,  and  dur¬ 
ing  the  early  decades  of  the  nineteenth.  “Political  Econ¬ 
omy,”  he  wrote,  “does  not  advance.  Since  the  revolution 
effected  in  that  science  by  Ricardo  (1817)  upon  the  whole  it 
has  been  stationary.”  In  the  science  of  Political  Economy, 
he  maintained,  “Nothing  can  be  postulated — nothing  can 
be  demonstrated ;  for  anarchy,  even  as  to  the  earliest  prin¬ 
ciples,  is  predominant.” 

But  it  is  not  to  give  concurrence  to  his  views  that  I  quote 
from  DeQuincey ’s  writings,  but  rather  to  lead  up  to  a  vital 
point,  and  which  seems  to  me  pivotal,  in  the  plan  I  am  pro¬ 
posing.  The  early  economists  (among  whom  Adam  Smith 
stands  out  as  the  Father;  and  whose  book,  “The  Wealth  of 
Nations,”  is  by  some  called  “the  Bible  of  Economics”) 
deduced  their  principles  from  the  conditions  actually  exist- 


♦DeQuincey’s  Essay  on  “Malthus.” 


The  Concluding  Chapter 


477 


ing  at  the  time  they  wrote — long  before  Industrialism  had 
appeared.  And  it  is  upon  these  antiquated  ‘ 1  principles  ’ ’ 
(in  reality  porisms)  that  modern  economists  are  still  build¬ 
ing  the  nation’s  economic  life.  It  is  quite  comprehensible 
that  a  book,  written  nearly  a  century  and  a  half  ago,  and 
which  purports  to  state  the  “principles”  upon  which  the 
wealth  of  a  nation — particularly  England’s  wealth — neces¬ 
sarily  rested,  might  be  esteemed  today  as  “the  Bible  of 
Economics” — but  in  that  case  I  should  insist  on  calling  it 
the  Old  Testament,  whose  usefulness  as  an  economic  1  ‘  guide, 
philospher  and  friend”  ceased  with  the  dawn  of  the  New 
Industrial  Revelation.  The  tremendous  changes  that  came 
over  the  world  as  Industrialism  developed  during  more  than 
a  century’s  time,  surely  call  for  a  New  Testament  in  the 
Economic  Bible.  Political  Economy  is  the  only  “science” 
that  hasn ’t  progressed,  in  spite  of  the  fact  that  the  automo¬ 
bile  has  displaced  the  ox-cart. 

When  Teeth  were  Literally  Pulled 

Not  so  many  years  ago  signs  in  barbers’  shops  and  win¬ 
dows  announced:  “Leeching,  Cupping  and  Bleeding  Done 
Here;  Also  Teeth  Extracted.”  I  distinctly  recall  a  tooth¬ 
pulling  operation  performed  by  the  town  barber — 
Schweitzer  by  name,  on  old  Ulmer,  the  luckless  patient.  I 
can  see  old  Schweitzer  now,  his  feet  encased  in  red  socks,  and 
slippers  worn  down  at  the  heels,  standing  on  a  common 
kitchen  chair,  behind  old  Ulmer  reclining  in  the  barber 
chair,  and  boring  with  all  his  strength  with  a  corkscrew¬ 
like  instrument  into  the  groaning  Ulmer’s  tooth  (or  was  it, 
perhaps,  a  vice,  and  he  was  fastening  his  hold  on  the  tooth) ; 
and  then  pulling  so  hard  that  he  fell  backward  from  his 
chair,  pulling  old  Ulmer,  who  was  holding  on  grim  death  to 
the  barber  chair,  along  with  him.  Did  he  get  the  tooth?  I 
do  not  know,  for  frightened  by  old  Ulmer’s  blood-curdling 
yells,  as  if  he  were  being  murdered,  I  took  flight.  This  was 
less  than  two  score  years  ago;  I  think  I  was  about  twelve 
years  old  at  the  time.  None  will  deny  that  dentistry  has 
made  some  progress  since  then. 


478 


The  New  Capitalism 

Medical  and  Economic  Doctors 

In  any  second-hand  book  store  you  will  find  on  the 
twenty-five  cent  counter,  hundreds  of  medical  books  written 
by  men  who  only  a  few  years  ago,  were  considered  authori¬ 
ties.  So  tremendous  and  quick  has  been  the  progress  in 
medical  science  and  everything  appertaining  thereto,  that 
those  works  are  hopelessly  out  of  date,  and  of  interest  only 
to  antiquarians  or  collectors  of  curious  books. 

In  every  department  of  human  endeavor  revolutionary 
changes  have  taken  place,  but  not  in  Political  Economy. 
Economic  doctors  still  perform  their  miracles  by  “Leeching, 
Cupping  and  Bleeding.  ’  ’  In  brief,  political  economists,  now 
as  then,  reason  from  the  Capitalistic  standpoint  and  for 
the  exclusive  benefit  of  those  constituting  the  Capitalistic 
System.  It  is  under  the  protective  logic  of  their  writings 
that  Industrialism  begot  Capitalism,  and  Capitalism  begot 
Mammonism. 

It  cannot  be  denied  that  Capitalism  and  Mammonism  are 
self  sufficient  and  successful  institutions,  and  the  explana¬ 
tion  for  this  is  to  be  found  in  the  fact  that  from  the  begin¬ 
ning  every  moral  principle  and  every  ethical  consideration 
has  been  carefully  excluded  from  all  works  dealing  with 
economics.  In  the  Bible  of  Moses  and  the  Prophets  you 
will  find  all  the  rules  of  morality,  by  the  practice  of  which 
civilization  gradually  reared  itself  aloft.  None  of  these  rules 
are  found  in  the  “Bible  of  Economics. ”  It  is  to  their  rigid 
exclusion  that  we  must  attribute  the  growth  and  success 
of  Capitalism  and  Mammonism. 

Moses,  we  are  told,  granted  a  bill  of  divorce  to  the  Jews 
because  they  were  hard-hearted ;  but  the  Economic  Fathers, 
of  their  own  volition,  absolutely  divorced  Ethics  from  Po- 
lical  Economy;  and  the  whole  human  race  has  been  com¬ 
pelled  ever  since  to  pay  alimony  to  those  constituting  the 
Capitalistic  family.  No  wonder  the  world — that  is  to  say, 
most  of  the  people  in  it,  are  poor  and  discontented.  No  won¬ 
der  there  is  misery  and  wretchedness,  and  crime  and  degra¬ 
dation,  among  them.  Where  will  it  end,  and  how? 


479 


The  Concluding  Chapter 
“The  Moving  Finger  Writes” 

It  was  reflections  such  as  these  that  urged  me  to  the  writ¬ 
ing  of  this  book — the  new  Evangel  of  Economics.  It  was 
in  the  contemplation  of  what  might  happen  unless  the  world 
(and  that  without  much  delay),  comes  to  its  senses,  that  I 
found  the  inspiration  for  my  plan.  In  my  previous  writ¬ 
ings  I  addressed  myself  to  the  powerful  men  who  today 
hold  the  economic  destiny  of  the  nation,  aye,  of  the  world, 
in  the  hollow  of  their  hand.  I  knew,  of  course,  that  any 
appeal  to  them  was  futile.  Neither  Moses  and  the  Prophets, 
nor  Christ  Himself,  could  move  them.  Nevertheless,  unless 
they  curb  their  insatiable  greed  for  WEALTH,  and  their 
gluttony  for  PROFITS — the  deluge  will  surely  come. 

Yes,  the  deluge!  I  am  not  a  pessimist;  neither  am  I  a 
cheerful  idiot — sometimes  euphemistically  called  an  optim¬ 
ist  by  the  unthinking.  But  I  try  always  to  be  calmly  sen¬ 
sible,  and  to  view  things  as  they  are.  I  have  never  been  able 
to  deceive  myself,  nor  to  throw  dust  into  my  own  eyes.  Nor 
am  I  an  alarmist.  Neither  am  I  a  prophet,  nor  the  son  of 
a  prophet,  nor  the  seventh  son  of  a  seventh  son.  But  when 
I  see  the  black  clouds  gathering,  and  the  lightning’s  flash, 
and  I  hear  the  ominous  roll  and  terrific  crashes  of  thunder, 
and  say  “There’s  a  storm  brewing;  it’s  going  to  rain — ” 
I  am  not  a  pessimist,  nor  an  alarmist,  nor  am  I  prophesying ; 
I  am  only  reading  what  is  plainly  legible  in  the  sky ;  I  am 
only  saying  what  must  be  clear  to  all  who  are  neither  blind, 
nor  deaf,  nor  perverse.  Just  as  we  can  read  with  fair  accu¬ 
racy  the  disturbed  elements  in  nature,  so  we  can  in  a  meas¬ 
ure,  interpret  the  social  unrest,  the  economic  upheaval,  the 
political  disturbances,  and  the  growing  discontent,  mani¬ 
fest  in  the  United  States  and  throughout  the  world  today. 

Appealing  from  Peter  to  Pavl 

Since  any  appeal  to  the  Mammonistic  masters  and  Capi¬ 
talistic  over-lords  of  this  earth  is  bound  to  fall  on  deaf  ears ; 
since,  moreover,  it  is  clear,  judging  from  the  sundry  things 
happening  at  the  present  time,  particularly  in  the  United 


480 


The  New  Capitalism 


States,  that  they  do  not  intend  to  release,  but  to  strengthen 
still  more  their  stranglehold  upon  the  throats  of  the  people, 
I  turn  to  the  people  themselves  to  tell  them  what  is  so  clear 
to  me — that  their  future  destiny  rests  in  their  own  hands. 

-  Probably  I  shall  not  escape  the  charge  of  “setting  class 
against  class.’ ’  James  E.  Thorold  Kogers,  M.  P.,  in  “Six 
Centuries  of  Work  and  Wages — the  History  of  English 
Labor  ’  ’ — says  in  his  preface : 

‘  ‘  The  charge  of  setting  class  against  class  has  always  been 
made  by  those  who  wish  to  disguise  their  own  indefensible 
advantages  by  caluminating  the  efforts  of  those  who  discern 
abuses  and  strive  to  rectify  them.  ’  ’ 

Jeremy  Bentham,  in  his  essay,  “Britain  in  1817,”  says: 

“Propose  anything  good;  the  answer  is  at  hand: — wild, 
theoretical,  visionary,  Utopian,  impracticable,  dangerous, 
destructive,  anarchial,  subversive  of  all  governments — there 
you  have  it.” 

The  Plan  I  propose  is  necessarily  a  theory,  until  it  as¬ 
sumes  the  proportions  of  an  experiment,  in  which  case  I 
maintain  that  it  will  demonstrate  itself  a  complete  success, 
for  the  reason  that  the  principles  upon  which  it  is  based 
are  fundamental  and  sound. 

I  do  not  think  it  necessary  in  this  chapter  to  give  a  sum¬ 
mary  of  all  I  have  said  but  I  will  add  a  word  of  warning. 
Let  none  imagine  for  a  moment  that  the  things  I  propose 
shall  be  done  will  be  as  easy  of  performance  as  is  the  read¬ 
ing,  or  as  was  the  writing  of  this  book,  written  only  after 
twenty  years  of  thought,  study,  analysis  and  computation. 
Above  all,  let  none  imagine  that  the  Capitalistic-Mammon- 
istic  Entrepreneurs  will  surrender  instantly,  or  that  they 
will  not  put  up  a  bitter  fight.  Indeed  while  the  non-invest¬ 
ors  are  guffawing  over  a  Charlie  Chaplin  picture,  or  dawd¬ 
ling  over  their  evening  paper ;  while  the  wage'  earners  are 
yawningly  making  up  their  minds  whether  they  are  awake 
or  asleep;  and  while  certain  Labor  groups  are  nebulously 
debating  whether,  after  all,  quantity  wages  for  themselves 
are  not  preferable  to  economic  independence  for  all  the  non- 


The  Concluding  Chapter 


481 


investors,  they  are  diligently  taking  steps  to  prevent  this 
new  child  from  growing  up. 

Back  to  Earth) 

Throughout  the  writing  of  Part  II,  I  have,  for  the  sake 
of  convenience,  imagined  the  existence  of  the  New  Order, 
and  visualized  the  New  Capitalism  as  if  in  actual  operation. 
Will  the  New  Order  ever  become  an  entity  ?  Will  the  New 
Capitalism  develop  into  a  reality  f  I  do  not  know !  I  have 
lived  too  long  to  harbor  delusions.  But  this  I  do  know,  that 
if  ever  Labor  will  lift  itself  to  a  higher  plane  it  will  be 
through  some  such  plan  as  mine ;  not  necessarily  the  precise 
plan  I  have  formulated,  but  at  least  one  built  upon  the  fun¬ 
damental  principles,  which  I  have  merely  restated. 

It  is  quite  possible  that  years  will  elapse  before  those 
most  concerned  will  begin  to  discern  merit  in  my  plan.  Per¬ 
haps  the  present  generation  will  have  passed  away ;  but  the 
time  will  surely  come — say  around  the  year  1975 — when 
some  one  who  has  not  entirely  lost  the  power  of  analysis, 
the  capacity  to  think,  and  the  ability  to  reason,  will  com¬ 
pute  “what  might  have  been”  had  my  plan  been  followed. 
He  will  seize  upon  my  statement  that  under  the  New  Capi¬ 
talism  the  average  non-investor  family  will  be  enabled  to 
save  from  $100  to  $450  a  year,  and  compute  what  the  savings 
of  sixteen  million  families  would  have  amounted  to  within 
twenty-five  years,  say  from  1925  to  1949.  His  figures  will 
read  about  as  follows : 

At  the  rate  of  $100  a  year  their  aggregate  savings  would 
have  amounted  to  $1,600,000,000  a  year,  or  $40,000,000,000 
within  twenty-five  years;  or  $2,500  per  family. 

At  the  rate  of  $200  a  year,  their  aggregate  savings  would 
have  amounted  to  $3,200,000,000  a  year,  or  $80,000,000,000 
within  twenty-five  years ;  or  $5000  per  family. 

At  the  rate  of  $300  a  year,  their  aggregate  savings  would 
have  amounted  to  $4,800,000,000  a  year,  or  $120,000,000,000 
within  twenty-five  years;  or  $7500  per  family. 

At  the  rate  of  $400  a  year,  their  aggregate  savings  would 


482 


The  New  Capitalism 


have  amounted  to  $6,400,000,000  a  year,  or  $160,000,000,000 
within  twenty-five  years ;  or  $10,000  per  family. 

At  the  rate  of  $450  a  year,  their  aggregate  savings  would 
have  amounted  to  $7,200,000,000  a  year,  or  $180,000,000,000 
within  twenty-five  years;  or  $11,250  per  family. 

And  he  will  be  at  some  pains  to  make  clear  that  the  figures 
represent  only  aggregate  savings , — that  if  the  savings  had 
been  cumulatively  invested  in  the  sundry  enterprises  of  the 
New  Order,  and  earned  from  five  to  six  percent  a  year,  and 
compounded — the  Capital  accumulation  would  at  end  of  the 
twenty-five  years  be  considerably  more  than  double  the 
amount  of  the  savings. 

To  illustrate  what  he  means  he  will  take  the  case  of  a  man 
twenty  years  of  age  in  1925,  and  who  under  the  New  Capi¬ 
talism  would  be  enabled  to  save,  let  us  say,  $200  a  year ;  and 
who  invests  each  year’s  savings  in,  say  six  percent,  securi¬ 
ties  of  the  enterprises  of  the  New  Order,  and  allows  his  sav¬ 
ings  and  interest  to  accumulate.  At  the  end  of  twenty-five 
years,  or  by  the  time  he  is  forty-five  years  old,  this  man 
would  have  accumulated  a  fund  of  over  $11,000. 

He  will— 

But  why  pursue  this  theme  further.  “Though  I  were  to 
speak  with  the  tongue  of  men  and  of  angels”;  though  I 
were  to  continue  to  write  in  this  fashion  till  doomsday,  I 
could  add  nothing  to  what  I  have  said,  nor  augment  my 
argument,  to  show  that 

4  ‘  Men  at  some  time  are  masters  of  their  fates : 

The  fault,  dear  Brutus,  is  not  in  our  stars, 

But  in  ourselves,  that  we  are  underlings.” 


A  Postscript 


MY  interest  in  economic  subjects  dates  back  a  quarter 
of  a  century.  From  early  boyhood  I  was  an  in¬ 
defatigable  reader;  fiction  was  my  chief  delight. 
During  my  college  days  I  changed  from  fiction  to  belles- 
lettres — essays,  poetry,  drama.  History  was  added  in  due 
time.  The  one  subject  which  I  knew  had  a  literature  of  its 
own,  yet  which  failed  to  interest  me,  was  Political  Economy. 
Statistics  were  my  pet  aversion. 

One  day  there  fell  into  my  hands  a  little  book  of  essays 
on  economic  subjects.  I  have  forgotten  the  author’s  name 
and  the  title  of  the  book — but  no  matter.  Not  being  par¬ 
ticularly  interested  in  the  subjects  discussed  I  read  it  cas¬ 
ually,  until  I  came  to  the  following  sentence  : 

“The  poor  are  getting  richer  and  the  rich  are  getting 
poorer.  ’  ’ 

This  statement — one  of  supposed  fact  by  a  supposed 
authority — made  me  pause  and  ponder.  Instinctively  I  felt 
that  the  writer  was  not  telling  the  truth.  I  took  a  mental 
survey  of  the  little  suburb  in  which  I  lived.  I  knew  every 
family  and  its  circumstances.  They  were  for  the  most 
part  working  people,  all  of  them  poor.  As  far  as  these  sev¬ 
eral  hundred  families  known  to  me,  were  concerned,  the 
author’s  statement  was  not  true.  None  of  them  was  getting 
richer — all  of  them  were  as  poor  as  they  had  been  ten  or 
fifteen  years  before,  and  I  concluded  that  at  least  one-half 
of  the  sentence  quoted  above  was  a  lie. 

But  how  about  the  other  half,  viz.,  that  “the  rich  are 
getting  poorer”?  There  were  no  rich  men  in  my  commu¬ 
nity,  but  there  were  ten  or  twelve  families  in  those  times 
considered  well-to-do — small  business  men  worth  between 
ten  to  perhaps  fifteen  thousand  dollars.  Were  they  getting 
poorer  ?  Yes !  some  of  them  were ;  in  fact  a  number  of  them 
ultimately  became  bankrupt.  So  there  was  some  justifi- 


483 


484 


The  New  Capitalism 


cation,  after  all,  for  the  author’s  statement  that  “the  rich 
were  getting  poorer.”  It  was  literally  true  with  regard  to 
the  few  who  abided  in  my  immediate  neighborhood. 

But  being  of  an  inquisitive  mind  I  was  not  satisfied  with 
the  fact.  I  wanted  to  know  the  why  and  wherefore.  What 
were  the  underlying  reasons  for  this  anomaly?  I  wanted 
to  know  precisely  what  was  responsible  for  the  change  in 
the  status  of  the  well-to-do.  What  was  making  them,  if  not 
poor,  at  least  less  wealthy?  There  could  be  no  peace  for 
me  until  I  had  found  the  complete  answer  to  my  sundry 
questions. 

In  due  time  I  made  the  discovery  that  a  tremendous 
change  was  taking  place:  The  small  business  man  could 
not  compete  with  the  encroaching  big  business  man.  To 
attempt  competition  was  inviting  bankruptcy.  A  few,  prob¬ 
ably  not  realizing  what  was  going  on,  were  foolish  enough 
to  try  it,  with  the  inevitable  result:  they  were  pushed 
against  the  wall.  In  particular,  at  this  moment,  I  recall 
the  fate  of  a  splendid  family  known  to  me,  living  in  an¬ 
other  part  of  the  city,  the  father  and  sons  of  which  had 
built  up  a  lucrative  business,  dealing  in  oil.  Then  along 
came  the  Standard  Oil  Company,  undersold  them,  and  so 
drove  them  out  of  business.  I  can  call  by  name,  too,  a 
number  of  small  butchers,  and  a  sausage  maker,  who  were 
compelled  to  go  out  of  business  because  they  could  not  com¬ 
pete  with  the  big  slaughterers.  But  all  this  is  now  ancient 
history. 

Thus  I  arrived  at  the  conclusion  that  what  the  economic 
writer  had  stated,  viz.,  that  the  poor  were  getting  richer, 
was  not  true;  nor  was  it  true  that  the  rich  were  getting 
poorer.  The  thing  that  was  true,  and  which  he  did  not 
state — was  that  the  small  business  man  was  being  ruth¬ 
lessly  eliminated. 

My  interest  in  economic  subjects  was  now  thoroughly 
aroused.  True,  I  had  hoped  to  be  able  to  pursue  my  studies 
without  bothering  much  about  statistics,  which  always 
worried  and  mystified  me.  In  brief,  for  several  years  I 
followed  the  line  of  least  resistance — concentrating  on  those 
subjects  which  did  not  depend  on  wearisome  statistical  ' 


A  Postscript 


485 


tables  for  their  comprehension  and  mastery ;  and  slighting 
those  which  did.  But  I  soon  discovered  that  if  I  wanted 
to  get  at  the  bottom  of  things  I  would  have  to  conquer  my 
antipathy  for  statistics.  This  I  bravely  resolved  to  do. 
It  was  a  bitter  pill,  but  I  swallowed  it.  For  a  year  or  two 
I  continued  my  studies  faithfully,  but  without  enthusiasm, 
doggedly  groping  my  stumbling  way  among  the  labyrin- 
thal  mazes  of  charts,  diagrams,  statistical  tables,  and  per¬ 
centages. 

Then  suddenly  a  great  light  began  to  break  in  upon  me. 
I  had  frequently  heard  the  defiant  challenge :  ‘  ‘  There  are 
the  figures,  and  figures  don’t  lie.”  Like  everybody  else  I 
accepted  the  rather  trite  and  silly  saying  as  a  truism — -an 
indisputable  and  incontrovertable  fact — the  argument  un¬ 
answerable.  But  in  due  time  I  discovered  that  it  was  pos¬ 
sible  to  lie  through  the  medium  of  figures  as  well  as  through 
the  medium  of  words.  A  Scottish  philosopher  neatly  ex¬ 
pressed  it  when  he  said:  “As  the  statist  thinks,  the  bell 
clinks.”  Moreover,  just  about  this  time  I  made,  the 
acquaintance  of  a  prominent  public  man — “a  gentleman 
and  a  scholar,”  who  had  spent  a  number  of  years  in  an 
important  branch  of  the  Government  service.  With  him  I 
discussed  many  things,  particularly  statistics.  He  told  me 
of  a  certain  case  in  which,  to  his  knowledge,  certain  official 
statistics  had  been  altered  by  order  of  a  certain  high  official, 
to  suit  this  official’s  purposes.  While  this  startling  piece 
of  information  did  not  help  to  increase  my  faith  in 
statistics,  nor  my  respect  for  statisticians,  it  did  increase 
my  determination  to  get  under  the  skin  of  statistics. 

It  was  a  French  philosopher  who  said  that  men  employ 
speech  to  conceal  their  thoughts.  After  many  years  of 
patient  analysis  of  thousands  of  sets  of  statistics,  and  their 
correlation,  I  am  willing  to  go  on  record  as  saying  that  the 
purpose  of  statistics  seems  to  be  to  conceal  the  truth,  and 
to  confuse,  confound,  and  deceive  the  public. 

By  the  same  process  of  logic  I  have  arrived  at  the  com 
elusion  that  the  whole  “science”  of  Political  Economy  is 
built  around  a  framework  of  half  truths,  perversions  of 
half  truths,  and  plain  and  statistical  untruths.  And  I 


486 


The  New  Capitalism 


determined  that  one  day  I  would  write  a  book  which  would 
lay  bare  the  fundamental  fallacies  of  this  vaunted  “  sci¬ 
ence,  ”  and  the  glaring  sophistries  of  those  who  exploited 
it ;  while  at  the  same  time  setting  forth  the  true  principles 
and  premises,  and  upon  which  alone  it  is  possible  to  build 
an  orderly  economic  system.  And  I  flattered  myself  that 
the  net  result  of  my  labors  would  constitute  a  veritable 
Symphony  in  Economics. 

With  this  definite  purpose  in  mind  I  continued  my  eco¬ 
nomic  studies,  making  copious  notes  and  many  computa¬ 
tions,  while  writing  down  all  the  independent  conclusions 
at  which  I  was  arriving.  On  July  4,  1920,  I  began  the 
actual  work  of  composition.  For  a  whole  year  I  wrote — 
an  average  of  a  thousand  words  a  day.  But  the  more  I 
wrote  the  bigger  became  my  task,  and  my  subject.  At  the 
end  of  twelve  months  I  took  an  inventory  of  the  progress  I 
had  made.  I  found  that  while  I  had  written  a  full  three 
hundred  thousand  words  I  had  hardly  scratched  the  surface. 
All  that  I  had  done  in  a  year  ’s  time  was  not  even  a  phrase 
of  my  planned  Symphony. 

It  was  then  that  I  saw  the  magnitude  of  the  task  I  had 
set  for  myself,  and  the  utter  hopelessness  of  ever  accom¬ 
plishing  so  prodigious  and  ambitious  an  undertaking.  I 
realized  that  to  do  justice  to  myself  and  to  the  subject,  I 
would  have  to  write  not  one,  but  twenty  books — twenty 
ponderous  volumes,  the  writing  of  which  would  demand 
years  of  studious  solitude  and  intensive  concentration,  none 
of  which  I  could  afford  to  give.  Besides,  who  would  read 
a  work  of  such  proportions? 

Regretfully  I  abandoned  my  original  plan  to  write  an 
Economic  Symphony.  What  I  am  offering  the  public 
under  the  title  “The  New  Capitalism”  is  nothing  more 
than  a  few  elementary  lessons  on  a  few  of  the  principles 
of  economics,  and  those,  corrective  of  technique  rather 
than  exhaustive  of  the  theme.  There  is  hardly  a  paragraph 
that  could  not  be  developed  into  a  chapter ;  hardly  a  chap¬ 
ter  that  could  not  be  elaborated  into  a  book.  Therefore 
let  it  be  understood  that  the  various  chapters  constituting 
this  single  volume  are  not  a  compendium,  not  even  an  out-* 


A  Postscript 


487 


line  of  the  more  ambitious  work  I  had  in  mind  when  I  began 
to  write.  *  ‘  The  New  Capitalism  ’  ’  is  nothing  more  than  an 
attempt  to  strike  the  deeper  and  the  rarely  sounded  notes 
in  our  nation’s  economic  life,  a  work  essentially  fragmen¬ 
tary  in  character,  the  fragments  pieced  and  fitted  together 
into,  I  hope,  a  not  inharmonious  whole. 

Under  the  circumstances  it  is  not  strange  that  a  kind  of 
incompleteness  should  be  apparent  here  and  there.  To  sim¬ 
plify  what  is  essentially  mixed  and  complicated;  to  devise 
a  simple  solution  for  a  hundred  intricate  problems ;  to  shape 
a  definite  plan  out  of  a  confusion  of  cross  purposes;  to 
make  a  single  consistent  garment  out  of  multi-colored 
patches;  to  weave  a  myriad  tangled  threads  into  gorgeous 
vestiture  for  naked  Truth;  to  build  a  habitable  house  out 
of  rotten  timbers ; — these  are  the  things  that  I  have 
attempted  to  do  in  this  book — and  beside  which  the  mani¬ 
fold  labors  of  Hercules  were  as  a  series  of  playful  diversions. 

While  I  have  been  at  work  on  this  volume  during  two 
whole  years,  every  line  was  written  after  a  full  day ’s  work 
at  other  tasks  had  already  been  performed — written  during 
the  few  free  days  and  leisure  hours  and  spare  moments ;  on 
Saturday  afternoons  and  Sundays  and  holidays,  and  nearly 
every  day  from  after  dinner  until  midnight,  and  beyond. 
Already  tired  and  wearied  from  the  regular  day’s  work,  I 
often  drove  myself  to  the  task  I  had  set  for  myself.  As  I 
look  back  today  I  wonder  how  I  did  it  without  breaking 
down;  and  I  do  not  hesitate  to  say  that  I  should  not  care 
to  repeat  the  performance. 

I  purposely  avoided  moralizing,  and  reduced  to  a  min¬ 
imum  a  strong  natural  tendency  to  philosophize.  Nor  did 
I  make  any  attempt  at  fine  writing,  for  Literature  and  Sta¬ 
tistics  are  incompatible,  or  at  least  contradictory  terms. 
With  almost  rude  violence  I  suppressed  every  inclination 
to  indulge  in  flights  of  rhetoric,  nor  did  I  allow  myself  to 
engage  in  discursive  dissertation  merely  for  the  sake  of 
verbal  pyrotechnics,  preferring  to  sacrifice  style  for  truth, 
form  for  substance,  and  picturesqueness  for  the  one  end  in 
view — to  make  what  I  was  writing  comprehensible  and  in¬ 
teresting  to  the  average  man  and  woman. 


488 


The  New  Capitalism 


Statistics!  Oh,  yes!  there  are  statistics!  But  remem¬ 
bering  my  own  aversion  to  them  long  ago  I  used  them  spar¬ 
ingly,  and  only  to  whatever  extent  was  necessary  to  illus¬ 
trate  a  point,  establish  a  fact,  demonstrate  a  principle,  or 
justify  a  conclusion.  For  the  same  reason  I  have  introduced 
a  few  statistical  computations  of  my  own.  I  shall  not  be 
surprised  if  my  temerity  in  this  regard  will  be  met  by  gibes 
and  jeers ;  and  that  I  will  be  duly  written  down  as  an  eco¬ 
nomic  heretic  or  charlatan.  Of  one  thing  you  may  be  sure, 
that  those  who  will  protest  the  loudest  against  any  inde¬ 
pendent  computations  are  the  very  ones  who  have  for  years, 
without  so  much  as  a  whisper  of  objection,  swallowed  all 
the  false,  garbled  and  misleading  statements  and  statistics, 
and  upon  which  they  have  slyly  built  their  arguments,  or 
their  fortunes.  Those  who  do  not  find  a  single  thing  to 
criticise  in  the  Capitalistic  System  will  find  much  to  con¬ 
demn  in  my  book,  and  absolutely  no  virtue  in  my  plan. 

I  did  not  bother  much  about  pretty  terms  for  my  plan ; 
just  ordinary  words  sufficed.  I  speak  of  the  New  Order  in 
contradistinction  to  the  old,  or  ‘  ‘  established,  * f  order,  which 
is  composed  of  a  comparatively  small  number — a  decided 
minority;  whereas  the  majority  is  to  be  the  constituency 
of  the  New  Order.  Through  the  potency  of  the  New  Order 
there  is  to  come  into  existence  the  New  Capitalism— as  dif¬ 
ferent  from  the  old  or  established  Capitalism  as  night  from 
day.  The  plan  in  its  entirety  I  shall  not  object  to  become 
known  as  the  Baldus  Plan.  The  system  of  economics  that 
can  be  developed  out  of  it,  might  not  inappropriately  be 
called  the  Baldusian  System,  around  the  principles  of  which 
a  truly  Economic  Commonwealth  can  be  made  to  arise. 

I  fully  realize  that  I  have  fallen  far  short  of  a  supreme 
human  achievement,  yes,  even  of  my  own  expectations; 
nevertheless,  there  are  a  few  things  I  want  to  say  on 
behalf  of  my  book  and  myself. 

In  the  first  place,  the  writing  of  ‘‘The  New  Capitalism’ ’ 
was  primarily  a  labor  of  love,  and  as  such  I  give  it  to  the 
world.  At  the  same  time  I  have  no  delusions.  I  have  lived 
too  long  to  expect  either  gratitude  or  appreciation;  and 
I  have  read  enough  of  history  to  know  that  mankind  rewards 


A  Postscript  489 

its  servitors  with  persecution,  while  society  crucifies  its 
saviors. 

My  second  claim  is  that  throughout  the  writing  I  have 
adhered  steadfastly  to  the  fundamentals.  I  may  be  in  error 
with  regard  to  some  minor  points  entering  into  my  theme, 
but  as  regards  the  fundamentals,  I  stand  pat,  and  will  not 
compromise.  In  defense  of  the  fundamentals  I’ll  take,  if 
need  be,  my  solitary  stand  against  the  world.  I  say  this  in 
spite  of  the  existence  of  that  most  pitiful  and  numerous 
breed  of  creatures,  who  in  the  conceit  of  their  ignorance 
sweep  aside  principles  that  do  not  comport  with  their  selfish 
notions— those  intellectual  and  moral  pigmies  who  would 
deny  the  proposition  that  ‘‘man  is  a  biped”  for  the  reason 
that  they  actually  know  a  man  who  has  only  one  leg,  or  no 
legs  at  all. 

But  my  chief  and  proudest  claim  is  that  I  have  been  in 
earnest,  and  I  hope  I  have  succeeded  in  being  fair.  If  there 
is  an  occasional  vehement  word,  or  a  stentorian  sentence, 
construe  it  as  emphasis  rather  than  vindictiveness,  for  I 
carry  no  malice  against  any  man ;  nor  is  there  in  me  bitter¬ 
ness  against  any  human  institution.  I  have  the  satisfying 
consciousness  of  knowing  that  from  the  beginning  of  this 
work  to  its  completion  this  day,  my  intention  has  been 
sincere. 

To  the  many  millions  then — to  those  who  are  not  a  com¬ 
ponent  part  of  the  Capitalistic  System,  and  never  will  be, 
I  have  this  to  say.  On  July  4,  1776 — one  hundred  and 
forty-six  years  ago  today,  the  Founders  of  our  Republic 
declared  their  political  Independence  to  the  world.  In  that 
same  year,  Adam  Smith  published  his  famous  book  “The 
Wealth  of  Nations”  (called  by  some  “The  Bible  of  Eco¬ 
nomics”)  the  principles  and  tenets  of  which  have  gone  far 
towards  holding  the  nations  of  the  earth,  including  our 
own,  in  economic  bondage  and  subjection.  “The  New 
Capitalism”  is,  as  it  were,  your  Declaration  of  Economic 
Independence.  I  have  written  and  signed  it;  I  can  do 
no  more. 

S.  A.  Baldus. 

July  4 ,  1922. 


■ 


•  • 

. 

' 

' 


V 


, 

1 ;  \m 


♦ 


\ 


/  ' 


/ 


Date  Due 

DEC  rW  l)  3 

jqh'2'^ 

X  (  5»  ■, 

f 

0£C3i  51 

yy  os'T  <* 

OPi  i 

<**  •■" '  ■  " 5 

"p  155 ' 

) 

*  ■**  . 

\ 

mA 

[  ;  | 

<* 


✓ 


BOSTON  COLLEGE  LIBRARY 

UNIVERSITY  HEIGHTS 
CHESTNUT  HILL,  MASS. 


Books  may  be  kept  for  two  weeks  and  may  be 
renewed  for  the  same  period,  unless  reserved. 

Two  cents  a  day  is  charged  for  each  book  kept 
overtime. 


If  you  cannot  find  wh.it  you  want,  ask  the 
Librarian  who  will  be  glad  to  help  you. 


The  borrower  is  responsible  for  books  drawn 
on  his  card  and  for  all  fines  accruing  on  the  same. 


